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FEDERAL FINANCES 



OR 



The Income of the United States 



/ 

BY WM. E. BURKE 






CHICAGO : 

F. J. SCHULTE & CO., Publishers, 
298 Dearborn Street. 



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Copyright 1891, by Wm. E. Burke. 



PREFACE. 

The object of the following pages is to set forth 
in a plain and concise manner the United States 
system of taxation. This book is not a work on 
political economy, and no attempt will be made to 
discuss the merits of any tax system. The story of 
how our government levies and collects the money 
necessary to pay the annual expenses of so great 
a nation will be the scope and aim of this work. 

The reader will find in these pages what he could 
otherwise find only by long research, and by look- 
ing through a multitude of books, reports and 
magazines. The author has endeavored to explain, 
in a plain and practical way, the sources of federal 
income, and to set forth in a faithful manner the 
method of collecting the government taxes. In 
addition to this, some account has been given of 
the means used by unscrupulous people to avoid 
payment of government duties. The information 
given can be relied upon, and it is an elementary 
knowledge necessary to any one who hopes to have 
even a tolerable understanding of our national 
revenue system, 

W. E, B, 



CONTENTS. 



CHAPTER I. 

TAXATION — ANCIENT AND MODERN. 

Page. 

First accounts of taxation given in the Bible — Taxation before 
time of coined money — Tithes and tenths — Oriental methods 
— The revenue of ancient Greece — Customs duties 400 years 
before Christ — The Roman Republic — A simple and direct 
system of taxation — The Censors — Democratic way of assess- 
ing taxes — The field of Mars — The Censors favored their 
friends — The revenue of Rome from various sources — When 
Rome became an Empire — Taxation under Augustine — 
Rome imder Constantine the Great — The " indiction " method 
of levying taxes — Taxation in England — The Norman Kings 
and the Feudal system — Customs duties in Etherel's reign — 
The devices of the old kings — King John and the nobility — 
The result — The Magna Charter — Charles I. and his illegal 
exactions — The present tax system of Great Britain ,,.,,..,.. 21 

CHAPTER II. 

HISTORY OF UNITED STATES TAXES. 

Provisions of the Constitution — The first Congress — Steps taken 
toward devising a system of taxation — Extract from speech of 
James Madison — His plan adopted — The first tariff law — It 
was a simple measure — Did not bring in enough money to the 
Treasury — The second session of Congress — The internal 
revenue system — The Whisky Insurrection — The first bounty 
law— The direct tax of 1798 — War of 1814 and increase of 
taxation — Tariff of 1824 — Protection a prominent feature — 
(vii) 



viii CONTENTS. 

Page. 
Tariff law of 1828 — "Bill of Abominations " — Sectional in- 
terests — Nullification — The compromise — No charges until 
1846 — The Civil War and the new tariff law of 1861 — The 
internal revenue — Twenty-five acts in five years — Customs 
duties close of the war — Reduction of taxes — Act of 1872 — 
Act of 1879 — The horizontal reduction — The revision of 1883 
— The Mills Bill — The act of 1890 known as the " McKinley 
Bill " — Protection a feature — The excitement created — The 
measure now on trial before the American people 34 

CHAPTER III. 

SOURCES OF FEDERAL INCOME. 

Income of United States — Indirect taxation — No direct taxes 
at present time — Table showing amount received from each 
source for year ending June 30, 1890 — Statement of expendi- 
tures for the same time — The national income not wholly 
derived from taxation , 51 

CHAPTER IV. 

COLLECTION DISTRICTS AND CUSTOM OFFICERS. 

Collection districts described — Congress declares what shall be — 
The Treasury Department — Secretary of the Treasury — His 
duties — Collectors — Their duties — Naval Officer and Sur- 
veyor — Their duties — Appraisers, inspectors, weighers and 
gaugers , 54 

CHAPTER V. 

THE REVENUE MARINE. 

The importance of the Revenue Marine — Established August 4, 
1790 — Text of the first law — Life on a revenue cutter a cent- 
ury ago — Old methods of smuggling — Bold and piratical 
smuggling a thing of the past — The modern way — Revenue 
cutters of present time — How assigned to duty — Cruising 



CONTENTS. 

Page, 
grounds — Method of hailing vessels — The penant — The 
signal to "bring-to" — Firing a gun — Boarding a ship — 
Searching a vessel — Fastening the hatches — Arresting vessels . 63 

CHAPTER VI. 

CLEARANCE AND MANIFEST. 

A foreign vessel an alien — Its only rights secured by treaty — 
Entry can only be made at ports established by law — Vessels 
arriving in port must " enter " within twenty-four hours there- 
after — Delivering clearance and manifest papers — Vessels 
must not leave a port without making proper entry — Inspect- 
ors placed on board of incoming ship — Completing the 
entry — Clearance papers are passports, and are necessary 
credentials — The manifest, what it must contain — Mer- 
chandise from a foreign country can not be entered without a 
manifest , 71 

CHAPTER VII. 

WAREHOUSE AND BOND SYSTEM. 

Duties on merchandise formerly paid at time of entrance — The 
law of 1799 — Growth of the warehouse system— The present 
system of bonded warehouses — Government pubhc stores — 
Government warehouses — Private bonded warehouses — Who 
may operate private warehouses — Regulations governing 
bonded warehouses — How merchandise may be stored in 
warehouses — Bond to secure payment of duties — Goods may 
remain in bond three years — Removal of merchandise — 
Manufacturing bonded warehouses — Transportation in bond . 77 

CHAPTER VIII. 

APPRAISEMENT AND PAYMENT. 

When duties become due — Liability for duties a personal debt 
— The Government holds a lien on imported goods until duties 
are paid — Appraising merchandise — Assessing duties — Dif&- 



xr CONTENTS, 

Pane. 

culties in the way of assessing duties — The rule the appraiser 
must follow — Some of the strange things that happen in 
classifying articles — Classifying beans under the tariff 
law of 1883 — Three decisions by the Treasury Department in 
reference to the duty on beans — Tariff law of 1890 in refer- 
ence to wool — Elaborate distinctions — The difficulty of the 
appraisers — The sorting clause of paragraph 383 of the new 
tariff act — Wool growers want it construed in one way — 
Manufacturers think it means something else — Opinion of 
Treasury Department necessary to settle the difficulty — The 
new law in regard to appraisement 88 

CHAPTER IX. 

HOW DUTIES ARE COLLECTED. 

The story of an importation — The foreign merchant must make 
out an invoice — Invoice sworn to before U. S. Consul — The 
" consular certificate " — The captain of a vessel and his 
" manifest " — When within four leagues of the shore — Incom- 
ing vessels meet revenue cutter — Stopping at quarantine — 
Meeting the "boarding vessel" — The captain makes entry — 
Delivers his manifest — Permit to unload — How obtained — 
Warehouse permit — Bonded carts — Where and how merchan- 
dise is appraised — Samples sent to the public store — Duties 
on passengers, baggage — The " declaration " — The depot on 
the pier — The inspectors — Searching baggage — Assessing 
duties — Seizure — Penalties — Immigrants — Collecting duties 
on immigrant's baggage 96 

CHAPTER X. 

DISCRIMINATING DUTIES AND RECIPROCITY. 

Early practice in the United States in reference to discriminating 

duties — The law of 1817 — Power of the President to suspend 

tonnage duties — The law of 1872 in regard to duties on goods 

produced east of the Cape of Good Hope — Discriminating and 



CONTENTS. xi 

Page. 

Reciprocity act of 1864 — Meaning of reciprocity treaties under 
this act — Brief outline of reciprocity treaties with Austria, 
German Empire, Great Britain, Italy, Japan, Persia, Spain 
and other countries — The Hawaiian Reciprocity treaty of 
1875 — Reciprocity act of 1890 — Treaties under this act 1 12 

CHAPTER XI. 

AVOIDING DUTIES. 

Methods of cheating the Government — Practices adopted by for- 
eign manufacturers — Sending goods on consignment — The 
essential feature of the consignment plan — Silks undervalued 
by this system — The " dummy-package " and how the fraud is 
worked — The *' sample package" method of evading duties — 
The importer and /r^-y^r^a invoices — Allowances for damages 
under the tariff law of 1883 — Damage brokers — Securing ex- 
cessive damages by fraudulent methods . . . , 126 

CHAPTER XII. 

SMUGGLING. 

Smuggling defined — Avoiding duties is not smuggling — Some 
methods described — Wearing apparel — Decision of the Su- 
preme Court in the Astor case — The effect of the decision — 
Organized system of smuggling in clothing — Cigar smuggling 
a profitable business — The method of procedure — Smuggling 
wine — An instance in the harbor of Philadelphia — Opium 
smuggling — A smuggling transaction that netted the operators 
one million dollars 135 

CHAPTER XIII. 

THE ATLANTIC AND GULF COAST. 

The Atlantic shore indented by many good harbors — -The Coast 
guarded by revenue cutters — The shore patrolled by police- 
men — Distance of watchman's beat — The watchmen meet and 
exchange tickets — The iron box and the post — Merchandise 



ni CONTENTS. 

Page. 

importedby way of Atlantic coast— Table showing duties re- 
ceived from principal ports on the Atlantic coast— New York 
entitled to special mention — The harbor — The Custom House 
— Castle Garden— The Barge Office — The port of Charleston, 
S. C. — Key West, Florida, an important port — Table showing 
duties received from principal ports on the Gulf Coast — Ton- 
nage duties exceed import duties at some ports — Reason for 
this — The port of New Orleans — The port of Galveston 143 



CHAPTER XIV. 

MEXICAN FRONTIER AND PACIFIC COAST. 

Peculiarities of the Mexican Frontier — The Zona Libra — A 
piece of strategy by the Mexican Government — United States 
Frontier adjoining Mexico — The mounted inspectors — Act as 
detective^s — Mexican Frontier poorly guarded — The contour 
of the country affords protection to smugglers — Running 
horses from Mexico into the United States — The Mexican 
smuggler is prepared to fight — Stock raiser on the boundary 
line — His plan of avoiding duties on cattle — The Rio Grande 
river goes dry in the summer time — The smuggler then reaps a 
harvest — Scenes at El Paso, Texas, during the dry season — 
The legitimate trade with Mexico — Nature of imposts from 
Mexico — Commercial importance of the Pacific coast — Be- 
yond the Rocky mountains a new order of things set in — The 
port of San Francisco — Ships from all parts of the world — By 
way of Cape Horn — Vessels from China, Australia and the 
East Indies — Steel and iron from Europe — A great Chinese 
depot — The Pacific Coast guarded by revenue cutters — Table 
of tonnage and import duties received at the principal ports on 
the Pacific Coast , ♦ 154 



CONTENTS, xiii. 

CHAPTER XV. 

THE NORTHERN FRONTIER. 

Page, 

From Blaine in Washington to Pembina in North Dakota — 
Twelve hmidred miles of wild and mountainous country — No 
custom houses — Pembina and St. Vincent the outlets from 
Manitoba — Articles imported from Assiniboia and Manitoba 

— Dense forests surrounding the Lake of the Woods and 
Rainy Lake river — These trackless forests need no protection 

— The ports ofDuluth, Ashland and Milwaukee — The great 
port of Chicago — The peninsula of Michigan — The port of 
Detroit — Chief articles imported into the United States from 
Ontario — Smuggling on the Detroit river — Smuggling in the 
winter by means of sleighs — Many Chinese enter the United 
States at Detroit — The principal ports of entry on the lakes — 
The chief imports from Canada — Revenue cutters of the lakes 
— The frontier between the North Eastern States and Canada 

is poorly protected — The line stores 163 

CHAPTER XVL 

THE INTERNAL REVENUE. 

The internal revenue tax a prolific source of income to the gov- 
ernment — The revenue tax an excise tax — Method of collect- 
ing the internal revenue tax — It belongs to the treasury de- 
partment — Internal revenue districts are designated by the 
President — The revenue districts do not correspond with the 
customs districts — Number of revenue districts in a state — 
The revenue tax simple in operation — Stamps furnished to the 
collectors, who sell them to distillers and manufacturers of 
tobacco — The revenue stamp is a receipt — Reason for requir- 
ing articles subject to a revenue tax to be stamped — Table 
showing amounts received from the various internal revenue 
sources 171 



xiv CONTENTS, 

« 
CHAPTER XVII. 

OFFICERS OF THE INTERNAL REVENUE. 

Page. 
The commissioner of internal revenue appointed by the President 

— He has the general superintendency of the assessments and 
collection of internal revenue taxes — Collectors of internal 
revenue — Collectors have the power to appoint their deputies 

— Collectors must give their personal attention to their official 
duties — Must not leave their districts without leave of absence 

— The work of the collectors and their deputies — The ganger 
and his duties — Storekeepers and their duties — Special agents 
and their duties 175 

CHAPTER XVIII. 

DISTILLERIES. 

What constitutes a distillery — Stills and distilling apparatus must 
be registered — Penalty for not registering — Plans of a dis- 
tillery must be placed on record — The distiller must give 
bond — Distilleries must be constructed according to the regu- 
lations of law — Doors and furnaces fastened with government 
locks — The fermenting- tub — The cistern-room — The ware- 
houses — Storekeepers and ganger assigned to each ware- 
house — Duties of the storekeeper — Duties of the ganger — 
Table showing number of distilleries registered and operated 
during the year 1890 185 

CHAPTER XIX. 

REVENUE FROM DISTILLED SPIRITS. 

Distilleries and breweries a prosy subject — But as the govern- 
ment derives a revenue from them the subject must be under- 
stood — The government not in partnership with distilleries but 
has a proprietary interest in every distillery and brewery — To 
protect its rights the government has an agent to watch every 
still tub — Government control of distilleries — When grain 



CONTENTS. XV 

Page 

comes to the distillery it is weighed by the storekeeper — Watch- 
ing the fermenting-tubs — The distilled spirits emptied into re- 
ceiving cisterns — How spirits are guarded in the cistern- 
room — The gauger holds the keys — The owner of the distillery 
cannot draw off spirits except in the presence of the storekeeper 
and gauger — Testing the "proof" — Removing spirits from 
the warehouse — Buying the revenue stamps and paying the 
taxes , , , , , ,.,,,, • * • 193 



CHAPTER XX. 

REVENUE FRAUDS. 

Formerly many frauds were committed — The present Internal 
Revenue System almost perfect — Whisky sold for $1.90 per 
gallon when the tax was $2.cx) per gallon — How it was done — 
The illicit stills during the civil war and shortly thereafter — 
The " whisky frauds " of 1875 — How the great conspiracy was 
broken up — " Moonshining" — In the forests of Vermont and 
New Hampshire — At present confined to the Southern States 
— The moonshining district extends from the Cumberland 
Mountains in Kentucky to the Ozark Mountains in Arkansas — 
The inhabitants of this district are peculiar — The history of 
these people has never been written — They are something of 
a mystery — Supposed to be descendants of the white penal 
slaves of the old Virginia plantation — Some authority for the 
statement that they are descendants of Turkish pirates — The 
"moonshiner" lives a soHtary and secluded life — They are 
melancholy and sullen — These traits make the Southern 
" moonshiner" a troublesome character to the government — 
The " moonshining " stills of the mountain ravines — The 
method employed by the government in enforcing the law against 
these outlaws — The great raid of 1889 on the Pea Ridge 
" moonshiners " of Kentucky 199 



xvi CONTENTS, 

CHAPTER XXI. 

TOBACCO, SNUFF AND CIGARS. 

Page. 
The tobacco manufacture — Must give a bond — Regulations 
governing tobacco factories — How tobacco must be put up — 
The notice required by law — Revenue stamps for paying the 
taxes on tobacco — Sold by the collectors to the manufacturers 
— Affixing these stamps to packages and canceling them — The 
minute provisions of the law — The exacting regulations gov- 
erning the sale of cigars — Methods of evading the revenue 
tax on tobacco — Table showing income from the tobacco tax. 210 

CHAPTER XXII. 

OLEOMARGARINE AND OPIUM. 

Act imposing internal revenue tax on oleomargarine — The same 
when imported from a foreign country — Special tax paid by 
manufacturer — Oleomargarine must be packed in wooden 
packages — Notice i'equired — Wholesale dealers must pay a - 
special tax — Retail dealers — Tax not evaded — But few manu- 
factories — State laws in reference to oleomargarine — The tax 
on opium — Provisions of the new law — Manufacturer must 
give bond — How the tax is collected , . . w .' 2i8 

CHAPTER XXIII. 

SEIGNIORAGE. 

Act providing for the coinage of gold, silver and copper — Silver 
dollar the unit of value — The denominations — The law of 
1873 — The gold dollar the unit of value — The trade dollar — 
Seigniorage — Profits from coinage — Coining money for foreign 
countries — United States mints — Assay offices — Table show- 
ing profits on coinage 223 



CONTENTS, xvii 

CHAPTER XXIV. 

PUBLIC LANDS. 

tage. 
Receipts from sale of lands not a revenue from taxation — First 
acquisitions of territory — The Territory of the Northwest — 
The Louisiana Purchase — Florida acquired — Annexation of 
Texas — Settlement of Oregon boundary question— The 
Gadsden purchase — Purchase of Alaska — Survey and sale of 
lands in the Northwest — Public survey — The township system 

— The General Land Office — Land Districts — Public and 
private sale of land — The preemption right — The Homestead 

— Method of selling public land — Table showing amounts 
received from sale of public lands 226 

CHAPTER XXV. 

MISCELLANEOUS REVENUES. 

The first tax on banks — The act of 1864 — The tax on capital 
and deposits of national banks abolished — Tax on circulation — 
Tax'on national banfe for ten years — Patents and copyrights — 
Trade-marks — Fees, fines and penalties — Custom house fees — 
Consular fees — Pacific railroads — The charter of 1862 — Land 
grants and subsidies — The Thurman Bill — Minor Items — Seal 
fisheries — Soldiers Home fund — Indian lands — District of 
Columbia — Sale of Government property — Immigrant fund — 
Depredations on public lands '. 234 

. CHAPTER XXVL 

THE GRpAT CONTROVERSY. 

Two ways to study political economy — The single tax theory — 
Restricting inheritances — A germ of truth — Action of Illinois 
State Bar Association — Economical systems of a nation — 
Changes should be made slowly — A nation like an individual — 



xviii CONTENTS, 

Page. 

An imperfect growth — Imperfections in our Government — 
What can be done — What might have been, had a different sys- 
tem of taxation been adopted — The practical citizen and the 
present — The direct and indirect systems of taxation — A few 
definitions — What is claimed for indirect taxation — Objections 
to indirect taxation — The direct system of taxation and what is 
claimed for it — A mixed system of taxation the best for the 
United States — The concessions of practical men — Where the 
great controversy begins — Protectionists — Free Traders — 
Arguments for protection— Arguments against protection. , . . 247 



ILLUSTRATIONS. 



Page. 



Treasury Building Frontispiece. 

The Signal to " Bring-to " ^ 62 

Inspectors Boarding a Vessel 99 

Smuggling Cigars in New York Harbor 134 

The Policeman of the Shore 142 

Custom House at El Paso, Texas 152 

Smuggling Horses across the Rio Grande 155 

A Mounted Inspector 156 

Monument Marking Mexican Boundary 162 

The Line Store 170 

A Deserted Still-house 204 

A Frontier Land Office 231 



(xix) 



FEDERAL FINANCES. 



CHAPTER I. 

TAXATION — ANCIENT AND MODERN. 

A BRIEF review of the revenue systems of other 
countries and older civilizations may not be out of 
place in a work of this kind,, and will, in a measure, 
prepare the reader to better understand the finan- 
cial system of our own country. 

The first account we have in the Bible of any- 
thing in the way of general taxes is given in Num- 
bers xviii. II, 20, where it speaks of tithes, first 
fruits and the redemption money of the first born. 
In early times the tithe or tenth was a general cus- 
tom throughout Persia and Asia Minor. This was 
before the time of coined money, and taxes were 
paid by giving to the ruler the tenth of the prod- 
ucts of the fields. 

According to Herodotus, gold and silver was 
first coined in Lydia about Soo^j/^rs beforb Christ. 
It is not until after this time that we begin to hear 



2 2 FEDERAL FINANCES. 

of taxes being paid to governments as we under- 
stand taxes at the present time. The earlier sys- 
tems of taxation which we read about were very 
crude, and in many instances very unjust. When 
an ancient ruler desired means with which to go to 
war, he set about securing it with little concern 
whether or not his method was fair and just. A 
favorite scheme of the ancient kings was to entrap 
some man of wealth into acting a part which dis- 
pleased the reigning monarch, and then the unfor- 
tunate man would be banished and his property 
confiscated. Many an'Oriental merchant has saved 
his head by surrendering as a ransom all his prop- 
erty to the king. The more powerful of the East- 
ern monarchies derived the most of their revenues 
by making the conquered provinces pay an annual 
tribute. 

The revenue of ancient Greece was derived from 
various sources. By confiscating the estates of 
criminals and aliens, and by conquest and long pos- 
session, the States of Greece became the holder of 
large landed estates. The lands were leased or 
farmed out and the rents accrued to the state. All 
the mines within the territory of Greece also 
belonged to the state, and these, too, were farmed 
out. Duties and tolls were levied on imports and 



FEDERAL FINANCES. 23 

exports. Foreign vessels were compelled to pay- 
tonnage for the privilege of entering a harbor. 
Imports and exports were subject to a duty of two 
per cent. As early as 400 years before Christ the 
Greeks had a regular system of collecting custom 
duties. The' value of the goods imported or 
exported was registered in the custom house at the 
port of entry or shipment, and the fiftieth (two per 
cent.) was not paid in kind, but in money. The 
duties were not collected by public officials, as is 
done in modern times, but by agents who paid the 
government for the privilege. The state would 
6ffer the sole right to collect all the duties of a cer- 
tain port to the highest bidder. The broker secur- 
ing the right to collect these duties and tolls was 
called a farmer of the revenue. 

A different and higher sdale of duties was usually 
laid upon exports and imports in the harbors of the 
countries which had been brought under the subju- 
gation of Greece. At Byzantium a ten per cent, 
duty was collected on all merchandise exported to 
and imported from all countries on the Black Sea. 
A public building, what we now call a custom 
house, was built on the Bosphorus, in which to 
. store the tithes when the duty was not paid in 
money. Thirty revenue ships, well manned and 



24 FEDERAL FINANCES. 

under the command of two generals, hovered 
around the channel leading to the Black Sea, and 
whenever a trading vessel appeared in sight the 
revenue ships would pounce down upon it and 
demand the tenth before allowing the vessel to either 
enter or pass out of the sea. The annual income 
from all sources of the Athenian state, at the time 
of the breaking out of the Peloponnesian war, was 
about one thousand talents ($1,026,000). This 
does not seem like a very large amount, but it 
must be remembered that the purchasing power of 
money at that time was much greater than it is now. 
The public treasuries of Athens were kept in a cell 
attached to the back part of a temple of Minerva, 
in the citadel. The money kept here was conse- 
crated to Minerva, but this did not prevent the 
Greeks from using the money in time of great need. 
The priests could usually prevail upon the fair god- 
dess to part with her treasures when the welfare of 
Athens was at stake. 

When Rome was a republic she had a simple and 
direct system of taxation. About two hundred 
years after the foundation of the city of Rome, the 
" census " was instituted. This was a method of 
numbering the people and valuing their fortunes. 
Two magistrates were appointed to do this work, 



FEDERAL FINANCES. 25 

and were called censors. They were clothed with 
almost unlimited power, and to be a censor was to , 
hold one of the highest offices in the Roman repub- 
lic. The census was taken in the same open and 
democratic way in which all the business of the 
Roman government was conducted at that time. 
On the day appointed to take the census, heralds 
were sent through the city to summon the people 
to the field of Mars, where, seated in curule chairs 
and surrounded by a retinue of clerks, the censors 
enrolled the citizens, took an inventory of their 
property and declared each one's taxes. Unless a 
citizen gave a correct statement of his property he 
was subject to severe punishment should he be dis- 
covered in his attempt at concealment. The cen- 
sors were sole judges of the amount of taxes each 
citizen should pay. The censors often favored 
their friends, and there was no equality or justice 
in the manner in which the burdens of the state 
were meted out to the taxpayers. Then, as now, 
the rich often escaped their just share of the public 
expenses. Some estates were arbitrarily assessed 
at a very high rate, while other estates were some- 
times entirely exempt from taxes. 

Rome derived considerable revenue from the gold 
and silver mines which she captured from Spain. . 



26 FEDERAL FINANCES. 

and held as property of the state. The natives of 
Spain were made captives and condemned to work 
in the mines. At one time the proceeds from these 
mines enriched the Roman coffers at the rate of four 
thousand dollars a day. Mention must also be 
made here of the revenue derived from salt mines. 
The Romans placed a high value on salt, and its 
scarcity made it valuable. In the early history of 
the republic any one could buy and sell this article. 
But after the conquest of Macedonia, a country 
famous for its salt productions, the government 
assumed control of the salt market. Importations 
of salt into Rome were forbidden, in order to give 
the government a monopoly of the salt business. 
' A revenue tax was placed upon this commodity, and 
the salt wells of Macedonia became a profitable 
source of revenue to the republic. 

When Rome became an empire (B. C. 31) a con- 
siderable change was made in the system of taxa- 
tion. Personal taxes, an excise tax and real taxes 
were introduced. Legacies and inheritances were 
also required to pay a tax ; customs duties were 
regulated and extended. 

In the reign of Augustus and his successors, 
duties were imposed on every kind of merchandise 
imported into Rome. The articles imported con- 



FEDERAL FINANCES. 27 

sisted mostly of aromatjcs, such as myrrh, pepper, 
ginger and cinnamon; a great variety of precious 
stones, leather from Babylonia, cotton, silks, ebony 
and ivory. The duty was much higher than the 
custom tolls of the Greeks, and ranged from two per 
cent, to twelve per cent. At one time Augustus, 
desiring to strengthen his military forces, devised a 
new method of enlarging his revenue. He sug- 
gested a tax of five per cent, on all legacies and 
inheritances. This tax was opposed by the wealthy 
citizens, but the senate levied the tax. The nobles 
took advantage of every legal device to avoid pay- 
ing this excise to the government, and in many 
instances they ^cceeded. 

In the time of Justinian many severe and unjust 
methods of collecting taxes were introduced. The 
most unpopular and intolerable of all was what was 
known as the sale of monopolies. The crown 
would grant the sole right to some company to sell 
or deal in a certain article of commerce. For this 
privilege the company would pay a stipulated amount 
to the general government. The company having 
the sole right to deal in a certain article would, of 
course, have a complete monopoly of the same. 

The methods of taxation in the Roman Empire 
were about as we have just described, from B. C. 31 



28 FEDERAL FINANCES. 

to A. D. 315. At that time, Constantine the Great 
moved the capital to Constantinople, and recon- 
structed the affairs of state. Constantine invented 
the " indiction " method of levying taxes. By this 
system, every fifteen years was made a period of 
taxation. The emperor, by a solemn edict, or 
indiction, which was published in every province 
and city, prescribed the measure of tribute to the 
general government, and set forth the terms of 
payment. This arbitrary and despotic method 
lasted, with little variation, until the downfall of the 
empire. 

But little can be said on the subject of taxation 
during the early history of England. A country 
roust make some progress in civilization before it 
can have a system of taxation. Before that time, 
its rulers support themselves by conquest, confisca- 
tion and a piratical method of taking whatever they 
want. Therefore, it is not until the time of King 
Alfred, that England can be said to have had any 
regular system of taxation. This prince made some 
progress in establishing a regular revenue. 

With the conquest of England by Norman kings, 
the feudal system was introduced. The custom of 
.the feudal law was, that when a king conquered a 
new country, he immediately divided it up among 



FEDERAL FINANCES. 29 

his generals, who held their lands under a sort of 
knight-service. The only debt they owed the king 
for the great landed estates that he bequeathed 
them, was to attend him, should he become involved 
in a war. The knights and generals in their turn, 
parceled out their estates to lesser chiefs and lords, 
on the same plan as they themselves had derived 
them from the king. This made a chain of union 
from the king down to the humblest peasant, and 
by means of this arrangement, a crude method of 
taxation was devised, which well served a warlike 
people. If the king's vassals did not wish to attend 
the king on a hostile expedition, they could pay a 
sum of money called a scutage. Sometimes the 
vassal was not allowed the privilege of personal 
service, but was required to pay the scutage. And 
not infrequently, the kings would pretend that they 
were going on a war expedition merely for an ex- 
cuse to levy the scutage tax. The military tenants 
or holders of the large landed estates were not sup- 
posed to be taxed, but only to render aid and service 
in time of war. But in the course of time, the 
kings began to make exceptions to this rule, and to 
tax the barons under different pretenses. Finally, 
it became the practice to tax tillable land in every 
variety of form. These taxes were at times very 



30 FEDERAL FINANCES 

burdensome. During the reign of William Rufus 
the taxes were so high that the farmers left their 
fields to seek for other work, and a famine was the 
result. 

Customs duties became, early in the history of 
England, an important source of revenue. As 
early as Etherei's reign a custom duty was levied 
on vessels arriving with wine and fish. The right 
to collect these duties was farmed out after the Ro- 
man fashion, and this practice was continued until 
as late as 1671. 

The old Norman kings were not wanting in de- 
vising schemes to enlarge their revenues. Sales 
had to be made in public markets, and the king 
collected a tax on each sale. On the public high- 
ways toll-gates were established wherever it was 
profitable to maintain them. Escheats were also a 
source of great revenue. If a baron should have 
no children his land reverted to the crown. When 
a baron died the king would take possession of the 
land and make the heir prove his title. Besides, 
the prospective heir was compelled to ask per- 
mission to do homage and pay a compensation to 
the king. The king would often make exorbitant 
demands, and keep possession of the estate until his 
demands were complied with. No man could ap- 



FEDERAL FINANCES. 3 1 

proach one of these olden time kings without a 
present in his hand. A gift was the open sesame 
that unlocked the royal doors. No matter how 
just the cause, the king would not grant a hearing 
unless a consideration was forthcoming. All the 
offices were sold, and an action in the superior 
court could not be brought without a gift for the 
king. As the old rulers of Britain assumed control 
over trade they exacted pay from any one who wished 
to engage in trades, commerce or manufacturing. 
The exclusive privilege of manufacturing or selling 
a certain article was sometimes granted a person or 
corporation. The sole right to make and sell an 
article of commerce was a valuable franchise, and 
the king was always liberally paid for these grants. 

When the old kings could find nothing else to 
tax they turned their attention to the Jews. . For 
centuries the Jews of England were not only perse- 
cuted, but they were fined and plundered in every 
conceivable manner. As they were not under the 
protection of law, all sorts of excuses were invented 
for the purpose of extorting money from them. 
At one time the Jews were all tHtown into prison, 
and the sum of sixty thousand marks demanded as 
the price of their liberty. 

During the reign of King John the nobility re- 



32 FEDERAL FINANCES. 

fused to pay the arbitrary taxes demanded by this 
prince. The result was a civil war, in which the 
nobles were victorious. They drew up a charter 
or bill of rights and compelled the king to sign it. 
This is known as the Magna Charter, and it greatly 
restrained the plundering methods of the English 
kings. The most important point about the Great 
Charter was that it provided that the king could 
levy no special tax without the consent of parlia- 
ment. While the Magna Charter was the founda- 
tion of English liberties, yet it was only the begin- 
ning of the end of abuses by English rulers. The 
line of authority between the king and the parlia- 
ment was not distinctly drawn, and many of the 
rulers continued the old policy of raising a revenue 
by plunder and extortion. 

From the time of King John down to the acces- 
sion of the house of Tudor the income of the crown 
was not so great as in the time of. the Norman con- 
querors. But after this the income of the crown 
began to increase again. The reign of Charles I. 
was one of high taxes, exactions and monopolies. 
The many illegal*and arbitrary methods resorted to 
by Charles for the purpose of raising a revenue, had 
a ruinous effect on the nation, and hastened the de- 
thronement of this unpopular king. 



FEDERAL FINANCES. 33 

On the accession of William III., a distinction 
was made by parliament between the portion al- 
lotted to the crown and that given to the public serv- 
ice. From this time on, Great Britain began to 
exercise a-^more just method of securing a national 
income. At present, the annual expenses of Great 
Britain are provided for by a low tariff on imported 
merchandise, not produced in the kingdom, a land 
tax, a property and income tax, a stamp tax, and 
an excise tax. 

It is not necessary to speak of the different meth- 
ods of taxation in other countries, as the general 
system of all ancient and modern nations will be 
found to be substantially the same, at di^fferent pe- 
riods of their history, as that described in this 
chapter. 



CHAPTER II. 

HISTORY OF UNITED STATES TAXES. 

The constitution of the United States provides 
that Congress shall have power " To lay and collect 
taxes, duties, imposts and excises." When the 
first Congress met at New York in 1789 it found 
the country financially embarrassed. The Revolu- 
tionary War had left the country greatly in debt, 
and besides, there was no money in the treasury 
with which to pay the immediate expenses of the 
government. But it was not long until steps were 
taken to secure an income for the young Republic. •■ 
Congress had been in session but a few days when 
the House went into a committee of the whole on 
the state of the Union. James Madison was the first 
speaker, and addressed the committee as follows: 

" I take the liberty, Mr. Chairman, at this early 
stage of the business, to introduce to the committee 
a subject which appears to me to be of the greatest 
magnitude; a subject, sir, that requires our first 
attention and our united exertions. ***** 

" The deficiency in our treasury has been too 
notorious to make it necessary for me to animad- 
34 



FED ERA L FINANCES. 3 ^ 

vert upon that subject. Let us content ourselves 
with endeavoring to remedy the evil. To do this 
a national revenue must be obtained; but the system 
must be such a one, that, while it secures the object 
of revenue, it shall not be oppressive to our con- 
stituents. Happy it is for us that such a system is 
within our power; for I apprehend that both these 
objects may be obtained from an impost on articles 
imported into the United States. 

" In pursuing this measure, I know that two 
points occur for our consideration. The first 
respects the general regulation of commerce; which, 
in my opinion, ought to be as free as the policy of 
nations will admit. The second relates to revenue 
alone; and this is the point I mean more particu- 
larly to bring into the view of the committee. Not 
being at present possessed of sufficient materials 
for fully elucidating these points, and our situation 
admitting of no delay, I shall propose such articles 
of regulations only as are likely to occasion the 
least difficulty." 

Mr. Madison then submitted to the committee an 
outline for a bill on customs duties. This plan 
of taxation met with general approval, and, finally, 
on July 4, 1789, a tariff bill passed both houses of 
Congress. This first tariff was a very simple meas- 



36 FEDERAL FINANCES 

ure, its object being merely to provide a revenue 
for the government, with such incidental protection 
to American industries as would naturally follow 
the enactment of a tariff law. The tax on luxuries 
was made higher than those on necessities. The 
duty on common brown sugar was placed at one 
per cent, per pound, while on loaf sugar the duty 
was three cents per pound. Common wines were 
taxed ten cents per gallon, while the expensive 
Madeira wine was taxed eighteen cents per gallon. 
The average duty on all imported articles was 
about eight and one-half per cent. 

An act imposing tonnage duties was passed at 
the same time. This law provided that ships built 
within the United States, and owned by citizens 
thereof, should be taxed at the rate of six cents per 
ton. If the vessels were built within the United 
States, but owned by foreigners, the tax was thirty 
cents per ton. But vessels owned by foreign- 
ers, and built elsewhere than within the United 
States, engaged in the coasting trade, and entering 
the ports of the United States, were required to 
pay a tax of fifty cents per ton. No other methods 
of taxation were devised by the first Congress. 

The tariff and tonnage duties did not bring in 
enough money to the treasury, and when Congress 



k 



FEDERAL FINANCES. 37 

convened the second time, members all saw the 
necessity of devising some method of increasing 
the revenue. The subject of excise or internal 
revenue was taken up and discussed long and ear- 
nestly. It was proposed to levy an excise or rev- 
enue tax on spirits, but there was considerable ob- 
jection made to this mode of taxation by the repre- 
sentatives from North Carolina, Georgia and Penn- 
sylvania. Madison declared that he preferred di- 
rect taxes, but thought the people would not sub- 
mit as graciously to direct taxation as they would 
to excise duties on spirits. In due time a bill was 
passed by the House requiring the payment of a 
revenue tax of nine and eleven cents per gallon on 
all distilled spirits, according to the grade. The 
bill was passed in March, 1791, and Congress im- 
mediately divided the country into districts and ap- 
pointed a supervisor for each district with power to 
appoint deputies to aid him in collecting duties. 
This was the beginning of our great system of in- 
ternal revenue taxes, and Congress never adopted a 
wiser or more judicious law, and it is strange it met 
with so much opposition in some States. • 

The law seemed to be particularly obnoxious to 
the people of Western Pennsylvania, and tEe dis- 
tillers in that part of the State refused to pay the 



38 FEDERAL FINANCES. 

tax. Meetings were held throughout that part of 
the country, and resolutions passed condemning the 
law. Some of the resolutions criticised and abused 
the revenue collectors for attempting to enforce the 
law, and the officers were intimidated to such an ex- 
tent that in some of the districts they became 
frightened and resigned their offices. 

Alexander Hamilton, who was then Secretary of 
State, wrote an address and endeavored by explain- 
ing the law, to pacify the discontented. But it did no 
good. Rebellion was abroad in the State of Penn- 
sylvania. Many prominent and otherwise law- 
abiding people were bitterly opposed to the law. 
Even Abraham Gallatin, who afterwards was Sec- 
retary of State, and who eventurally became a firm 
believer in internal revenue taxes, was at that 
time strongly opposed to excise duties. Hamilton, 
having tried in vain to pour oil on the troubled 
waters, the President then came forward with a 
proclamation, in' which he exhorted all persons to 
refrain from any acts which would have a tendency 
to interfere with the enforcement of the law, and he 
called upon all law-abiding citizens and the local 
magistrates to aid in bringing offenders to justice. 
But the President's proclamation was also disre- 
garded. The crisis had now come, and stringent 



FEDERAL FINANCES. ^9 

measures had to be adopted. A military force of 
fifteen thousand men was raised and placed under 
the command of General Henry Lee, who, in the 
autumn of 1794, marched into the rebellious dis- 
trict. On the approach of the troops the insurgents 
weakened, and the trouble ended. It is a curious 
fact, however, that the first internal revenue duty 
was inforced at the point of the bayonet. The 
internal revenue duty on spirits was in force, with 
some modifications, until 1 802 , when it was repealed. 
In 1794 a revenue duty was laid on carriages. 
This was an awkward and cumbersome tax, and as 
it was very unpopular with the people, it was soon 
repealed. In 1795 Congress levied a revenue tax 
on two other things — sugar and snuff. Sugar 
refined within the United States was required to 
pay a revenue tax of two cents a pound. Snuff, 
at first, was taxed eight cents per pound, but it 
brought in but little revenue to the treasury, owing 
to the fact that the revenue duties on this article 
were avoided. Snuff" was made by the use of hand- 
mills which could be easily hidden, and as snuff is 
not a bulky article, it was not difficult to keep it 
out of the hands of the revenue collectors. As the 
revenue tax on snuff brought but little returns to 
the government, the law was repealed, and a tax 



40 FEDERAL FINANCES. 

then levied on the mills engaged in making snuff. 
The result was that a much better income was 
received than before. In some way, and as a sort of 
bounty to the owners of the snuff-mills, a drawback 
of six cents per pound was allowed them on all ex- 
ported snuff. The manufacturers found that it paid 
them better to sell all their snuff in foreign markets, 
for in addition to the prices obtained abroad, they 
received the drawback of six cents per pound from 
the government. This drawback operated as a 
bounty, and the money withdrawn from the treas- 
ury to pay this allowance was greater than the 
whole amount derived from the revenue tax on this 
article. The bounty system being expensive, and 
as the tax on the snuff-mills was unequal, owing to 
the smaller ones being unable to turn out as much 
snuff as the larger ones, and as it had been found 
difficult to collect a revenue on the manufactured 
article itself. Congress repealed all the internal rev- 
enue taxes on snuff. 

In 1798 the Committee of Ways and Means rec- 
ommended to Congress that $2,000,000 be raised 
by a direct tax apportioned among the States in 
accordance with the provisions of the constitution. 
Congress acted on the advice of the committee, and 
the recommendation became a law. The bill was 



FEDERAL FINANCES. 4I 

passed largely out of deference to those who be- 
lieved in direct taxes, and who insisted that the 
government should early make a precedent of 
direct taxation in order that it might be readily re- 
sorted to in time of need without complaint from 
the people. And then it must be remembered that 
there were a considerable number of influential 
persons at this time who believed that direct taxes 
having been provided for in the constitution, should 
at all times be one of the methods employed in se- 
curing a revenue for the government. An able 
financier of the day, in writing on this subject, said, 
" Unless there shall be a direct taxation which shall 
affect every man of property, the people in general 
in this country will not have the least apprehension 
of the existence of a national government, and con- 
sequently have no regard for it. " 

Early in Jefferson's second administration it be- 
came evident that a war with Great Britain was 
among the possibilities. Gallatin, who was then 
Secretary of the Treasury, in his report to Con- 
gress for 1807, pointed out the necessity of increas- 
ing taxation in order that the government might be 
more fully prepared in the event that war should be 
declared. He favored increasing the import and 
internal revenue duties, and suggested the advisa- 



42 FEDERAL FINANCES. 

bility of laying direct taxes. The advice was not 
heeded at the time. But the war of 1812 came, 
and with it the necessity of providing funds with 
which to prosecute it. The customs duties, which 
had been sHghtly increased from time to time since 
1789, were now doubled, and the internal revenue 
taxes which had been repealed in 1802 were again 
re-imposed. These taxes, however, were not suffi- 
cient to meet the emergencies of war, and in 18 14 
the second direct tax in the history of the union 
was laid and apportioned among the States. This 
time the bill called for $3,000,000. The return of 
peace brought the abolition or reduction of most of 
these taxes, except the duties on imports. Two 
years after, in 18 16, the customs duties were 
slightly increased. In debating the bill to raise the 
duties it was openly declared that the purpose of 
the measure was to protect American industries. 
This may be said to be the first real protective 
tariff bill passed by Congress. 

Again, in 1824, the country was treated to a new 
tariff adjusted with the idea of a still further pro- 
tection to American manufactories. The average 
rate of duty, by this measure, was raised to thirty- 
seven per cent. This strong protective policy 
greatly stimulated manufacturing industries. To 



FEDERAL FINANCES. 43 

own and operate a mill was found to be profitable, 
and capital started many wheels. The result was 
that this industry was overdone and the country 
held an over-supply of manufactured goods. The 
manufacturers, not understanding the situation, 
asked for further protection, which they received in 
1828. The bill which Congress passed in that year 
was known as the " Bill of Abominations." But it 
brought little relief to the manufacturers. The 
tariffs of 1 8 16 and 1824 had filled the country with 
mills and overstocked the stores with manufactured 
goods. The result of this and the large amount of 
merchandise imported in anticipation of increase in 
prices, brought about a decline in prices, which at 
that time, seemed very strange, and many people 
were totally unable to understand it. Many im- 
porting houses failed and a number of manufac- 
tories collapsed. 

The tariff of 1828 not having given satisfaction, 
and because the national debt was nearly paid, it 
was deemed necessary to reduce the duties. To 
this end a bill was passed in 1832 which placed tea 
and coffee on the free list, and reduced the tariff on 
some articles, but retained the protective features of 
the bill of 1828. The discussion of this measure 
was one of the most exciting that has ever been 



44 FEDERAL FINANCES. 

held in Congress. It brought out the fact that the 
tariff is in a great measure a sectional question. 
The agricultural States, then as now, claimed that 
high protective duties was an unequal method of 
taxation and was a species of class legislation 
entirely in the interests of the manufacturing 
States. The Southern States, which were engaged 
in raising cotton and tobacco, were fierce in their 
denunciations of a tariff which they claimed was 
arranged entirely for the benefit of the New 
England manufactories. When the bill became a 
law it caused great dissatisfaction at the South, and 
the people of South Carolina, especially, were in 
such a tumultuous mood that they met in conven- 
tion and resolved: " That the new tariff law of 
1828, and the amendment to the same of 1832, are 
null and void and no law, nor binding upon this 
State, its officers or citizens." In Charleston, open 
resistance was threatened in case the revenue 
officers should attempt to collect the duties in that 
port. Jackson, who was then president, took a 
firm stand, and declared that the laws of the country 
should be enforced. He sent a war ship to 
Charleston harbor, and ordered General Scott to 
proceed with a body of troops to the rebellious 
city. The nuUifiers, like any disorderly mob, 



FED ERA L FIN A NCES. 45 

cooled down when confronted by civil authority, 
and the excitement soon passed away. 

The following year a compromise was effected, 
and concessions m.ade to the South. Henry Clay 
introduced and secured the passage of a bill which 
provided for a gradual reduction of the tariff duties 
until at the end often years they should reach the 
standard demanded by the South. 

By the time the ten years were up the Clay 
Compromise Bill had brought down the duties to a 
low general average, the country seemed to be in 
a prosperous condition, and no material changes 
were made in the tariff until 1846. Robert J. 
Walker, who was then Secretary of the Treasury, 
was greatly in favor of simplifying the tariff duties, 
and in an able and elaborate report to Congress he 
laid down the following economical principles: 

" 1st. That no more money ought to be col- 
lected than was necessary for the wants of the 
government economically administered. 

" 2nd. That no duty should be imposed on any 
article above the lowest rate which would yield the 
largest amount of revenue. 

" 3rd. That below such rate discrimination might 
be made descending in the scale of duties, or, for 



^6 FEDERAL FINANCES. 

imperative reasons, the article might be placed in 
the list of those free from all duty. 

" 4th. That the maximum revenue duty should 
be imposed on luxuries. 

" 5th. That all minimums, and all specific duties, 
should be abolished, and ad valorem duties sub- 
stituted in their place, care being taken to guard 
against fraudulent invoices and undervaluations, 
and to assess the duty upon the actual market value. 

" 6th. That the duty should be so imposed as 
to operate as equally as possible throughout the 
union, discriminating neither for nor against any 
class or section." 

Congress passed a bill in conformity with these 
principles, and no tariff law in this country ever 
gave such general satisfaction. The law remained 
in force with but little change for fourteen years. 
The general average of this tariff was about twenty- 
fivepercent., and it brought in anabundantrevenue. 
In fact, it far exceeded the needs of the govern- 
ment, although the Mexican war was begun and 
carried through while this law was in operation. 

But the country was now soon to enter upon a 
new era of taxation. Congress found, when again 
called upon to revise the tariff, that it was con- 
fronted with the serious task of providing for the 



FEDERAL FINANCES. 4^ 

expenses of a civil war. A bill increasing the cus- 
toms duties and providing for a direct tax of $20,- 
000,000, and levying an income tax of three per 
cent, on all incomes exceeding $800, was passed in 
1 861. A year after this another bill was passed 
providing for a still greater income to meet the 
exigencies of war. Internal revenue duties were 
levied upon almost everything, and an excise tax 
placed upon nearly every article to which a stamp 
could be attached. During the Civil War more 
than twenty-five acts on the subject of internal 
revenue were passed by Congress. The customs 
duties were increased from time to time until in 1864 
they rose to an average of forty-seven per cent. 

At the close of the war the internal revenue 
taxes were rapidly reduced, but the customs duties 
were left unchanged for some time. In 1870 the 
duties were lowered on tea, coffee and sugar, and a 
few articles placed upon the free list, but the duties 
were advanced on steel rails. In 1872, tea and 
coffee were placed upon the free list. 

At every session of Congress for the next seven 
years efforts were made to reduce the duties, but 
only slight changes were made until 1879, when the 
duty was reduced on quinine. A horizontal reduc- 
tion often per cent, was also made on cotton, iron, 



48 FEDERAL FINANCES. 

wool, paper, glass and leather, but in 1 87 5 the act was 
repealed and the old duties restored. The tariff 
now averaged about forty-five per cent., which 
was two and one-half per cent, less than the highest 
average tax during the war. 

No further revision of the tariff was made until 
1882, when public opinion became so strongly in 
favor of a tariff reduction that Congress appointed 
a committee to investigate the tariff law and make 
a report thereon. This committee, or commission 
as it was called, after eight months of traveling 
over the country and making inquiries as to the 
workings of the tariff, submitted their report to 
Congress. The report was voluminous, but it did 
not recommend any radical changes in the tariff 
schedule. As a result of the report of this com- 
mission, Congress passed a bill March 3, 1883, ii^ 
which the duty on a number of articles was lowered, 
while the duty on wool, sugar, iron and steel was 
increased. On the whole, the tariff was raised, 
making the average duty about forty-six per cent. 
The law was very unsatisfactory to the people, and 
the subject was agitated for five years before Con- 
gress again made a serious attempt to grapple with 
the question. In 1888 a bill, called the " Mills 
Bill," was introduced in the House of Representa- 



FEDERAL FINANCES. 49 

tives. This bill provided for a general reduction 
of duties, and placed wool, salt and lumber on the 
free list. After a lengthy and stormy debate the 
bill passed the House, but was defeated in the 
Senate. 

On October i, 1890, an act known as the " Mc- 
Kinley Bill " passed both houses, and became a 
law October 6th of the same year. The discussion 
leading up to this legislation was exciting and dra- 
matic in the extreme. The friends of this measure 
boldly proclaimed that protection to manufactories 
was the chief end to be secured in tariff legislation, 
and that revenue to the government was a subor- 
dinate consideration. The tariff duties on tin, 
glass, woolens, silk and plush were measurably 
increased by this bill, raising the average duty to 
forty-seven per cent. The duties on certain im- 
ported articles were so much increased that mer- 
chants, knowing there would be an advance in home 
prices, hastened to lay in a large stock of goods 
before the higher duties came into force. The 
excitement attending this general speculation was 
intense; especially was this so in New York City, 
where the custom house was kept open until mid- 
night of the day the law went into force. All day 
and late into the night of October the first the har- 

4 



^O FEDERAL FINANCES. 

bor was crowded with the incoming steamers, whose 
captains had rushed them across the ocean that they 
might have their ships and cargoes recorded at the 
custom house before the new law went into effect. 
The difference in the tariff of a shipload of goods 
was considerable to an importing merchant, hence 
the rush to be in before the new law and the 
higher duties were in force. A close call was 
made by Captain Haines of the Etruria, who entered 
the custom house rotunda at just one minute of 
twelve o'clock. Cheer after cheer went up after the 
captain handed his manifest to one of the clerks. 

No tariff law ever created such an excitement as 
has this one. The question is being widely dis- 
cussed from one end of the land to the other. In 
every debating society the question, " Resolved, 
that tariff duties be reduced," provokes exciting 
debate. The measure is now on trial before the 
American people, and it is difficult to tell what will 
be the result. It is the duty of every good citizen 
to study this question in a dispassionate manner, 
with the earnest hope that he may arrive at the 
truth. 



J 



CHAPTER III. 

SOURCES OF FEDERAL INCOME. 

The income of the United States at the present 
time is derived entirely from indirect taxation, no 
direct taxes being levied. The different channels 
through which the annual income flows into the 
national treasury can be best illustrated by giving 
a summary of the revenues of the government from 
all sources for the fiscal year ending June 30, 1890: 

From customs , $229,668,584.57 

From internal revenue 142,606,705.81 

From profits on coinage, bullion deposits and assays, 10,217,244.25 

From sales of public lands 6,358,272.51 

From fees — consular, letters-patent and land 3,146,692.32 

From sinking fund for Pacific railways 1,842,564.52 

From tax on national banks, 1,301,326.58 

From custom fees, fines, penalties and forfeitures,. . 1,299,324.52 

Fi-om repayment of interest by Pacific railways. . . . 705,691.52 

From sales of Indian lands 372,288. 15 

From Soldiers' Home permanent fund 308,886,99 

From tax on seal-skins 262,500,00 

From immigrant fund 241,464.00 

From sales of government property 192,123.99 

From deposits for surveying public lands 112,314.79 

From depredations on public lands 35j852.37 

From the District of Columbia 2,809,130.90 

From miscellaneous sources * 1,600,014.81 

Total receipts $403,080,982.63 

Four hundred millions of dollars is a great sum 

SI 



52 FEDERAL FINANCES. 

of money, and the reader may wonder what the 
government needs of such a vast sum. It must be 
remembered that the national government must pay 
all its own officers from the president down to the 
humblest lighthouse keeper. A standing army and 
navy must be provided for, ministers and consuls 
must be maintained in foreign countries, and the 
pensions must be paid to the old soldiers of the late 
war. These are a few of the expenses which the 
government must annually provide for. 

Although the object of this work is to treat strictly 
of the income of the United States, it may be of 
interest here to give a tabulated statement of the 
expenditures of the government for the same fiscal 
year that the table of receipts is given for: 

For civil expense $ 23,638,826.62 

For foreign intercourse 1,648,276.59 

For Indian service 6,708,046.67 

For pensions 106,936,855.07 

For the military establishment, including rivers and 

harbors and arsenals 44,582,838.08 

For the naval establishment, including vessels, mach- 
inery and improvements at navy yards 22,006,206.24 

For miscellaneous objects, including public buildings, 

lighthouses, and collecting the revenues 43,563,696.85 

For the District of Columbia 5>677,4i9. 52 

For interest on the public debt. 36,099,284.05 

For deficiency in postal revenues 6,875,036.91 

Total expenditures $297,736,486.60 



FEDERAL FINANCES. ^3 

From the first table given it appears that the in- 
come of the United States is not wholly derived 
from taxation. The amount received from the sales 
of public lands is not a tax in the true sense of the 
word. The public lands, of course, belong to the 
people, and the greater part of these lands were 
purchased with their money, which had been pre- 
viously derived from them by taxation, yet much of 
the public domain was purchased at a nominal 
figure, and, as it has always been sold at an ad- 
vanced price, it can hardly be said that the money 
derived from the sale of the public lands can be 
classified as an income derived from taxation. 

It will also be seen from a glance at the first table 
given above that the greater part of our national 
income is derived from the customs duties, or the 
tariff tax, and from the internal revenue tax. As 
these two methods of taxation are the chief sources 
of the government income, and as they are the most 
complex in operation and the most difficult to 
understand, considerable space will be devoted to 
the consideration of these two subjects. 



CHAPTER IV. 

COLLECTION DISTRICTS AND CUSTOM OFFICERS. 

Ports of entry and delivery are established by 
Congress. A collection district consists of a port 
of entry and the ports of delivery that belong to it. 
For instance, the district of Providence has been 
mapped out by Congress as follows: 

" The district of Providence to comprise all the 
waters and shores northward of a line running 
nearly a northeast course from the south end of 
Warwick Neck to the south end of Rumstick Point 
at high- water mark, and so much of the Narragansett 
Bay and the shores in the State of Rhode Island 
and Providence Plantations, as are within the 
county of Kent, including the port of East Green- 
wich and that part of Warwick lying upon Green- 
wich Bay; in which Providence shall be the port of 
entry, and Pawtuxet and East Greenwich ports of 
delivery." 

Vessels coming into a collection district must 
first " enter " at a port of entry, by delivering mani- 
fest and clearance papers to the collector of the 
district, before proceeding to a port of delivery. 



FEDERAL FINANCES. ^^ 

Vessels must enter and clear at ports of entry, but 
may unload at any port of delivery within a dis- 
trict. 

Section 233 of the United States Statutes pro- 
vides that: " There shall be at the seat of govern- 
ment an Executive Department, to be known as the 
Department of the Treasury, and a Secretary of 
the Treasury, who shall be the head thereof." All 
taxes due the United States must be finally settled 
and adjusted in this department. The Secretary 
of the Treasury directs the superintendence of the 
collection of all government taxes. The Secretary 
must from time to time prepare plans for the im- 
provement and management of the revenue, and 
for the support of the public credit. He must pre- 
scribe the forms of keeping and rendering the pub- 
lic accounts. He must also prescribe the regula- 
tions for carrying out the provisions of law relating 
to raising a revenue from duties on imports, and 
for enforcing the provisions of the internal revenue 
law. 

Collectors are appointed for a term of four years, 
and their salary depends upon the district to which 
they are appointed. The collector for the port of 
New York receives almost as much as the President 
of the United States, 



^6 FEDERAL FINANCES. 

At ports where there are a collector, naval offi- 
cer and surveyor, it is the duty of the collector: 

First. To receive all reports, manifests, and 
documents to be made or exhibited on the entry of 
any ship or vessel, according to regulations. 

Second. To record, in books to be kept for that 
purpose, all manifests. 

Third. To receive the entries of all ships or 
vessels, and of the goods, wares and merchandise 
imported in them. 

Fourth. To estimate, together with the naval 
officer, where there is one, or alone where is none, 
the amount of the duties payable thereupon, in- 
dorsing such amount upon the respective entries. 

Fifth. To receive all moneys paid for duties, 
and to take all bonds for securing the payment 
thereof. 

Sixth. To grant all permits for the unlading 
and delivery of goods. 

Seventh. To employ, with the approval of the 
Secretary of the Treasury, proper persons as 
weighers, gangers, measurers and inspectors, at 
the several ports within his district. 

Eighth. To provide, with the like approval, at 
Jthe public expense, store-houses for the safe-keep- 



i 



FEDERAL FINANCES. c^ 

ing of goods, and such scales, weights and measures 
as may be necessary. 

Naval officers appointed for duty at ports of 
entry are under the direction of the collectors, and 
their duties are as follows: To receive copies of all 
manifests and entries; to estimate, together with 
the collector, the duties on all merchandise subject 
to duty; to keep a separate record of such esti- 
mates; to countersign all permits, clearances, cer- 
tificates, debentures, and other documents, to be 
granted by the collector, and to examine the col- 
lector's abstract of duties, and other accounts of 
receipts, bonds and expenditures, and certify the 
same if found to be correct. 

The surveyor is the third officer in power at a 
port of entry, and he is, in all cases, subject to the 
direction of the collector. The following are the 
duties of the surveyor: 

First. To superintend and direct all inspectors, 
weighers, measurers and gangers within his port. 

Second. To report once in every week to the 
collector the name or names of all inspectors, 
weighers, gangers or measurers who are absent 
from or neglect to do their duty. 

Third. To visit or inspect the vessels which 
arrive in his port, and make a return in writing 



5 8 FEDERAL FINANCES. 

every morning to the collector of all the vessels 
which have arrived from foreign ports during the 
preceding day; specifying the names and denomi- 
nations of the vessels, the masters* names, from 
whence arrived, whether laden or in ballast, to 
what nation belonging, and, if American vessels, 
whether the masters thereof have or have not com- 
plied with the law, in having the required number 
of manifests of the cargo on board, agreeing in sub- 
stance with the provisions of law. 

Fourth. To put on board of each such vessel 
one or more inspectors immediately after their 
arrival in his port. 

Fifth. To ascertain the proof, quantities and 
kinds of distilled spirits imported, rating such spirits 
according to their respective degrees of proof, as 
defined by the laws imposing duties on spirits. 

Sixth. To examine whether the goods imported 
in any vessel, and the deliveries thereof, agreeably 
to the inspector's returns, correspond with the per- 
mits for landing the same; and if any error or dis- 
agreement appears, to report the same to the 
collector, and to the naval officer. 

Seventh. To superintend the lading for expor- 
tation of all goods entered fbr the benefit of any 
drawback, bounty or allowance, and examine and 



FEDERAL FINANCES. ^9 

report whether the kind, quantity and quality of 
the goods, so laden on board any vessel for expor- 
tation, correspond with the entries and permits 
granted therefor. 

Eighth. To examine, and, from time to time, 
and particularly on the first Mondays of January 
and July in each year, try the weights, measures 
and other instruments used in ascertaining the 
duties on imports with standards to be provided by 
each collector, at the public expense, for that pur- 
pose; and where disagreements or errors are discov- 
ered, to report the same to the collector; and obey 
and execute such directions as he may receive for 
correcting the same, agreeably to the standards. 

General appraisers. The President, by and with 
the advice of the Senate, appoints four general 
appraisers, whose duty it is to travel from port to 
port and supervise the appraisement of merchandise. 
The object of this is to secure uniformity in the 
appraisement of dutiable goods. The general 
appraisers receive monthly reports from the local 
appraisers of the valuation that they have placed 
upon leading articles of import in their respective 
ports. The general appraiser must assist the local 
appraiser by conference and advice, and keep the 
local appraiser informed in regard to the ruling 



6o FEDERAL FINANCES. 

prices of export commodities in the leading mar- 
kets of the world. These general appraisers are 
each assigned to certain territory, and once in every 
four months they come together in New York and 
compare the results of their inquiries. If they find 
any variations in methods of appraising dutiable 
values they make a report of the same to the Secre- 
tary of the Treasury. 

Local appraisers are appointed by the collector of 
a port, and it is their duty, under the direction of 
the collector, to correctly ascertain, by all reason- 
able means, the quantity, character and actual for- 
eign value of merchandise on the day of exporta- 
tion to the United States. Upon this finding is 
based the classification by which duties are assessed. 

Inspectors are appointed by the collector of a 
port, but they are under the direction of the sur- 
veyor. Inspectors are required to wear uniforms, 
and the badge of their ofhce must be conspicu- 
ously displayed. It is the duty of the boarding 
inspectors to board all vessels arriving from foreign 
ports, and, after ascertaining the name of the vessel 
and master and port of departure, to examine the 
documents relating to the vessel and crew, and cer- 
tify the manifest of cargo, verifying the same by 
actual examination, and to seal or otherwise secure 



FEDERAL FINANCES. 6 1 

the hatches and openings till the necessary permits 
for unloading can be granted and a discharging 
officer assigned to the vessel. 

Discharging inspectors are assigned to vessels 
for the purpose of examining the cargoes of such 
vessels, and to superintend the unloading and stor- 
ing or delivery of the goods, in such manner and 
under such safeguards as will prevent loss to the 
revenue of the United States by failure to secure 
any lawful duties accruing on such goods. 

Weighers are appointed by the collector, but are 
assigned to duty by the surveyor. Weighers are 
required to weigh dutiable goods when, for the pur- 
pose of ascertaining the duties thereon, it is neces- 
sary to weigh such goods. The weigher is furnished 
with a blank-book, in which he records daily an 
entry of goods weighed. As soon as a cargo of 
merchandise has been weighed, the weigher must 
make an immediate report to the collector's office, 
in order to facilitate the prompt liquidation of 
duties. The scales employed at most ports of entry 
are an old-fashioned pattern, with beams and 
weights. The weighing of a ship's cargo on these 
scales is a tedious task. 

Gangers are appointed by the collector of a port, 
but they are also under the direction of the sur- 



62 FEDERAL FINANCES. 

veyor. It is the duty of gangers to be present 
when gaugeable goods are being unloaded from 
vessels. They must gauge and measure all liquid 
cargoes, such as oils, syrups and wines, which come 
as imports from foreign countries. In order to 
facilitate the assessment and payment of duties, 
gangers must make a special return to the collector 
of the quantity embraced in each cargo, as soon as 
possible after the same shall have been ascertained. 



CHAPTER V. 

THE REVENUE MARINE. 

A VERY important factor in the collection of the 
custom duties is the revenue marine. 

The tariff duty was imposed in 1789, and within a 
year afterward smuggling had become so common 
that Congress, at its next session, found it necessary 
to devise some method for protecting the revenue on 
the Atlantic coast. Under the title of an act " to 
provide more effectually for the collection of the 
duties imposed by law on goods, wares and mer- 
chandise imported into the United States," the fol- 
lowing law was passed August 4, 1790: 

" Be it enacted, that the President of the United 
States be empowered to cause to be built and equip- 
ped so many boats or cutters, not to exceed ten, 
as may be necessary to be employed for the pro- 
tection of the revenue, the expense whereof shall 
not exceed ten thousand dollars, which shall be paid 
out of the product of the duties on goods, wares 
and merchandise imported into the United States, 
and on the tonnage of ships or vessels. 
63 



64 FEDERAL FINANCES. 

" And be it further enacted, that there shall be 
to each of the said boats or cutters, one master and 
not more than three mates, first, second and third, 
four mariners and two boys; and that the compen- 
sation and allowances to the said officers, mariners 
and boys, respectively, shall be, to the master 
thirty dollars per month, and the subsistence of a 
captain in the army of the United States; to a first 
mate, twenty dollars per month; to a second mate, 
sixteen dollars per month; to a third mate, fourteen 
dollars per month; and to every mate the subsist- 
ence of a lieutenant in said army; to each mariner, 
eight dollars per month; to each boy, four dollars 
per month; and to each mariner and boy the same 
ration of provisions Which is or shall be allowed to 
a soldier in the same army. The said allowances 
for subsistence to be paid in provisions or money 
at the contract prices, at the option of the Secre- 
tary of the Treasury. 

" And be it further enacted, that the officers of 
the said boats or cutters shall be appointed by the 
President of the United States, and shall respec- 
tively be deemed officers of the customs, and shall 
have power and authority to go on board of every 
ship or vessel which shall arrive within the United 
States, or within four leagues of the coast thereof, 



FEDERAL FINANCES. 65 

if bound for the United States, and to search and 
examine the same and every part thereof, and to 
demand, receive and certify the manifests herein- 
before required to be on board of certain ships or 
vessels, and to affix and put proper fastenings on 
the hatches and other communications with the 
holds of ships or vessels, and to remain on board 
the sai.d ships or vessels until they arrive at their 
places of destination." 

The above was the law in full in regard to revenue 
cutters, as enacted one hundred and one years ago. 

Since then many changes have been made in the 
service, although the object sought is still the same. 
The captain of a revenue cutter now receives a 
salary of twenty-five hundred dollars a year, which 
is quite an increase over the first amount paid to 
these officers. 

There is something almost pathetic in the words, 
" to each boy four dollars per month " in the old 
law just quoted, and it brings vividly to mind the 
feeble condition of the thirteen colonies on the 
Atlantic coast, that were then just starting out as 
the United States of America. And one cannot 
help wondering what could have been the history 
of the boys, who, a century ago, endured the hard- 
ships of the revenue marine service for the sum of 
s 



66 FEDERAL FINANCES. 

four dollars per month. Life on a revenue cutter 
is not very pleasant on the modern boats, and it 
must have been much worse on the little old-fash- 
ioned vessels of that time. 

In those days smuggling was carried on in a bold 
and piratical way. The smuggler was a brigand, 
who did not hesitate to use his sword should occa- 
sion demand. His craft, some nondescript schooner, 
with a wide expanse of sail, would hover around the 
New England coast waiting a favorable opportunity 
to put into some little nook and unload its cargo 
without the inconvenience of paying customs duties. 
Should this contraband vessel espy a revenue cutter 
bearing down upon her, she would seek safety in 
flight, and if*overhauled would fight to a finish. 
Many are the tales told about the revenue-marine 
fights during the early history of this country. 
But the days of bold and piratical smuggHng are 
over, and the officers and crew of a modern revenue 
cutter do not now engage in the hand-to-hand 
fights that were so common in the early history of 
the service. SmuggHng, however, has by no means 
become a lost art ; it is carried on more extensively 
than ever, bwt it has taken a new channel — a dif- 
ferent direction. The smuggler no longer uses 
force ; he resorts to strategy. He tries to avoid 



FEDERAL FINANCES. Sj 

duties by cunning and adroit methods. A vessel 
engaged in smuggling seeks to enter a harbor under 
a color of right. Sharp practice is resorted to now 
in place of the old way of force and fight. There 
is plenty of work for the modern revenue cutters 
to do. If it were not for these well-armed, swift- 
running vessels the harbors of the United States 
would be given over to smuggling, and but little 
duties on foreign importations would be collected. 

The modern revenue cutter is a small, steel- 
armored steam vessel, built low in the water, painted 
black with white stripes around the guardways, and 
carrying several fine steel guns of long range. The 
vessels are built especially for speed, and besides 
being propelled by powerful engines, some of them 
carry, in addition, a large spread of canvas. 

At present there are about forty revenue cutters 
in commission. T\\q personnel o{ the service consists 
of 220 commissioned officers, 27 pilots and 815 
seamen. The number of vessels boarded and 
examined last year was 23,161, of which number, 
915 were found to be violating the law, by which 
they incurred fines and penalties to the amount of 
$396,616. The expenditure on account of the 
revenue service last year amounted to $937,033.67 
of which $17,272.81 was spent in enforcing thelaw 



68 FEDERAL FINANCES. 

regulating the anchorage of vessels in the bay and 
harbor of New York. 

When a revenue cutter has been placed in com- 
mission, it is assigned to a certain cruising ground, 
which the cutter must regularly patrol. When a 
revenue cutter is on duty the officers must keep a 
sharp lookout for stray or suspicious looking ves- 
sels. Large steamship vessels making directly for 
port are not always stopped by the cutter. Sailing 
vessels are usually hailed, and when a rakish look- 
ing craft appears above the horizon, the little black 
cutter makes directly for it, and when within hail- 
ing distance the pennant and ensign are displayed 
as a signal for the vessel to stop or " bring-to," as 
it is called in sailor language. If the vessel at- 
tempts to run away or refuses to bring-to, a gun is 
fired by the cutter as the second signal to stop. 
If the strange vessel should still refuse to bring-to, 
what would follow would largely depend on the 
temper and mettle of the commander of the cutter. 
The probability is that the guns of the government 
boat would be turned on the vessel in earnest, and 
an iron missile sent crashing through the hull of the 
disobedient ship. The commander would be justi- 
fied in so doing, because the law provides that: 
" Whenever any vessel liable to seizure or examin- 



FEDERAL FINANCES. 69 

ation does not bring-to, on being required to do so, 
or on being chased by any cutter or boat which 
has displayed the pennant and ensign prescribed 
for vessels of the revenue service, the master of such 
cutter or boat may fire at or into such vessel which 
does not bring-to after such pennant and ensign has 
been hoisted, and a gun has been fired by such 
cutter or boat as a signal; and such master, and all 
persons acting by or under his direction, shall be in- 
demnified from any penalties or actions for damages 
for so doing." 

When a vessel brings-to, a boat is lowered from 
the cutter, and several revenue officers are taken 
over to the ship and placed on board. It is their 
duty to search and examine every part of the ves- 
sel, and to demand, receive and certify the mani- 
fests required by law of every vessel coming to the 
United States. On sailing vessels, fastenings are 
put on the hatches and sealed in such a manner 
that they cannot be opened again without breaking 
the seals. This is done to prevent any goods from 
being taken from the vessel on its way into port 
and before it is under the control of the collector. 
Sometimes one of the officers from the revenue 
cutter is left on the ship, and he must remain on 



yo FEDERAL FINANCES. 

board until the vessel arrives at the port of destina- 
tion. 

Should a vessel break bulk or land any part of 
its cargo before a permit has been granted by a col- 
lector, it is the duty of revenue cutters to arrest 
such vessels. Whenever a vessel is captured or 
arrested by a revenue cutter, it is the duty of the 
commanding officer to carefully preserve all papers 
and writings found on board the vessel, and to send 
them to the collector of customs at the nearest 
port of entry. 

In addition to guarding the coast and enforcing 
the laws relating to customs duties, the revenue 
cutters are also required to protect the merchant 
marine of the United States should occasion require, 
and to render assistance to any vessel that may be 
in distress at sea. In giving aid to wrecked vessels, 
the revenue cutters cooperate and act with the life- 
saving service. 



CHAPTER VI. 

CLEARANCE AND MANIFEST. 

When a foreign vessel comes to this country it 
comes as an alien and a stranger. Its only rights 
are those which are secured to it by treaty, and it 
must come into port subject to the laws and regula- 
tions of the United States. A vessel coming from 
a foreign port must not make entry elsewhere than 
at one of the regular ports of entry as designated 
by law. When once a vessel arrives within the 
limits of a collection district, the master of the ves- 
sel must, within twenty-four hours after arrival, 
" enter " his vessel, that is, he must report to the 
collector of the district, delivering to him copies 
of his clearance papers and manifest. If a vessel, 
after having arrived in port, should depart, or at- 
tempt to depart, before entry has been made, the 
master of the vessel would be liable to a penalty 
of four hundred dollars. If the vessel should suc- 
ceed in departing, a revenue cutter would be sent 
after it to arrest the vessel and bring it back. 
Whenever a vessel comes within four leagues of the 
United States coast it is liable to meet a revenue 
71 



-J 2 FEDERAL FINANCES. 

cutter. If it does, and an inspector is placed on 
board, the master of the vessel must give him a 
copy of his manifest if the inspector should de- 
mand it. 

When the vessel appears in the harbor of a port 
of entry, it is usually met by a revenue tug and 
two inspectors placed on board. This is done as a 
second preliminary in making the acquaintance of 
the visitor. The master of the vessel must also fur- 
nish to these inspectors a copy of his manifest. 
These inspectors usually remain on board until the 
ship lands and the cargo is unloaded. 

Coming into port and giving a copy of the ship's 
manifest to the inspectors does not complete the 
" entry." To do this the master of the vessel or 
his agent must go to the custom house and deliver 
another copy of his manifest, this time to the col- 
lector of the port. He must also produce to the 
collector his clearance papers which were granted 
to him by the officers of the foreign port from 
which he sailed. He does this by depositing the 
clearance papers with the consul of the nation to 
which the ship belongs. The consul then gives the 
master of the vessel a certificate stating that the 
papers have been deposited in his office. This 
certificate of the consul is given by the master of 



FEDERAL FINANCES. 7^ 

the vessel to the collector. The certificate is 
official evidence that the vessel is from the country 
it claims to be. 

A clearance paper is a statement given to a ves- 
sel when it leaves a port and puts out to sea. All 
commercial countries grant these passports to out- 
going vessels. These are a ship's credentials, and 
a vessel would no more put to sea without them 
than it would start without a compass. Without a 
clearance paper from its own country a vessel would 
be embarrassed at every port it entered. The 
clearance papers given to a master of a vessel are 
substantially the same, no matter by what country 
granted. These papers usually set forth the name 
of the ship, when and where built, number of tons 
burden, by whom owned, where bound and the 
name of the master in command. 

A manifest is a declaration under oath of the 
amount of dutiable goods on board of a vessel. 
When a vessel comes to this country from a foreign 
port its manifest must conform to the regulations 
prescribed by the United States. The law declares 
that " no merchandise shall be brought into the 
United States from any foreign port, in any vessel, 
unless the master has on board manifests in writing 
of the cargo." 



74 FEDERAL FINANCES. 

Every manifest required by this law must con- 
tain : 

First. The names of the ports where the mer- 
chandise in such manifest mentioned was taken on 
board, and the ports within the United States for 
which the same are destined, particularly noting 
the merchandise destined for each port, respect- 
ively. 

Second. The name, description, and build of 
the vessel; the true admeasurement, or tonnage, 
thereof; the port to which such vessel belongs; the 
name of each owner, according to the register of 
the same; and the name of the master of such 
vessel. 

Third. A just and particular account of all the 
merchandise so laden onboard, whether in packages 
or stowed loose, of any kind or nature whatever, 
together with the marks and numbers as marked on 
each package, and the number or quantity and de- 
scription of the packages in words at length, whether 
hogshead, barrel, cask, keg, bale, pack, box, chest, 
or package of any kind or sort, describing the same 
by its usual name or denomination. 

Fourth. The names of the persons to whom such 
packages are respectively consigned, agreeably to 
the bills of lading signed for the same, unless when 



FEDERAL FINANCES. 7^ 

the goods are consigned to order, when it shall be so 
expressed in the manifest. 

Fifth. The names of the several passengers on 
board the vessel, distinguishing whether cabin or 
steerage passengers, or both, with their baggage, 
specifying the number and description of packages 
belonging to each, respectively. 

Sixth. An account of the sea-stores remaining, 
if any. 

That part of the manifest which relates to the in- 
voice of the cargo must be verified by the resident 
United States consul at the port from which such 
merchandise is shipped, if it comes from a foreign 
country. « 

It will be seen, from what has been said about 
clearance and manifest papers, that they are im- 
portant documents in aiding the collector to prop- 
erly assess the value of an imported cargo, and to 
compute the duties thereon. The clearance papers 
of a ship show to what nation the vessel belongs, 
and our treaty with that country is the guide the 
collector must follow in assessing tonnage or other 
special taxes. 

If an EngHsh vessel should put into the port of 
New Orleans with a cargo of tobacco from Cuba, it 
would be allowed to enter and clear on the same 



76 FEDERAL FINANCES. 

terms as a vessel belonging to a citizen of the 
United States, provided the master of the ship 
could show by his clearance papers that his vessel 
was an English ship, because our treaty with Great 
Britain places the vessels of that country on the 
same footing as a vessel belonging to this country. 
If a vessel belonging to citizens of the United 
States could show by its clearance papers that it 
belonged to this country, and from its manifest that 
it had been laden at Honolulu, it would be per- 
mitted to enter a cargo of sugar free of duty under 
our treaty with the Hawaiian government of 1875. 
A cargo of sugar shipped from Cuba in American 
vessels would, however, until recently, be subject 
to pay the import duties on that article. 

Clearance papers are, therefore, of great impor- 
tance in enabling the collector of a port to know 
under what treaty the vessel is permitted to enter, 
and the manifest being a statement of the cost of 
goods in the country from which they are imported, 
forms the basis upon which he must compute the 
duties. 



CHAPTER VII. 

WAREHOUSE AND BOND SYSTEM. 

For ten years after the first tariff law was passed, 
duties had to be paid at the time the goods were 
imported. In 1799 an act was passed allowing fif- 
teen days to vessels arriving from foreign ports to 
discliarge their cargoes. At the expiration of that 
time, should there be any goods remaining on 
board, the collector was required to take and store 
them. The law provided, also, that, with the con- 
sent of the importer or master of the vessel, and 
after a five days' notice had been given to the col- 
lector, that he might take and store the goods. 
The same law provided that, where an importer did 
not wish to pay the duties at the time of importa- 
tion, that he could give his bond, with security, to 
pay at some future time, when he withdrew his mer- 
chandise from where it had been stored by the col- 
lector. Goods thus bonded could remain in store 
nine months. If, at the end of that time, any 
goods should remain upon which the duties had not 
been paid they were advertised and sold. The pro- 
ceeds of the sale went, first, to paying the custom 



78 FEDERAL FINANCES. 

dues, and the remainder, if any, was returned to 
the owner of the merchandise. 

This system of allowing merchandise to remain 
stored in warehouse under bond, until the owner 
was ready to withdraw it for sale, was extended 
and developed as commerce grew, until, in 1854, 
Congress passed a law establishing private bonded 
warehouses. This law provided that a merchant 
could import goods and place them, under certain 
regulations, in a warehouse of his own, giving a 
bond as security for the payment of the duties when 
the goods were withdrawn from the warehouse. 

At the present time warehouses for the storage 
of imported dutiable goods are known and desig- 
nated as government public stores, government 
warehouses, private bonded warehouses, bonded 
yards and sheds for the storage of heavy and bulky 
imported goods, and bonded manufacturing ware- 
houses. 

The public store is where seized and unclaimed 
goods are stored until claimed and duties paid. 
Government warehouses are those which are owned 
by a stock company and are used for the general 
storage of all imported merchandise. A company 
desiring to operate a bonded warehouse must first 
make application in writing to the collector of the 



FEDERAL FINANCES. Jg 

port, describing the premises, the location and 
capacity of the same, and setting forth that mer- 
chandise consigned to any one may be stored in 
such warehouse. If the collector finds, on investi- 
gation, that the public interest will be subserved 
thereby, the application will be granted. The 
company must then enter into a bond conditioned 
to comply with the laws regulating warehouses, to 
pay to the collector of the port the salary of the 
officers of the customs who are assigned to take 
charge of imported merchandise while stored in 
their warehouse, and that they will not allow any 
goods or merchandise to be removed from the ware- 
house without lawful permit. The rates of storage 
in these bonded warehouses belonging to stock 
companies are such as may be agreed upon by the 
owner or importer of the goods and the proprietors 
of the warehouse. 

Private bonded warehouses are such as are not 
rented to other parties for storage purposes, but 
are used entirely and exclusively by the owner for 
the storage of his own imported merchandise. He 
must give a bond exonerating and holding harmless 
the government from any risk, loss or expense of 
any kind connected with depositing merchandise in 
such a warehouse. The building is under the joint 



8o FEDERAL FINANCES. 

control of the owner and a government officer, and 
the owner must pay to the collector the salary of 
the customs officer who is assigned to duty at his 
warehouse. 

These bonded warehouses, whether owned by 
companies or private individuals, are all subject to 
the same general regulations. All bonded ware- 
houses and public stores, including those occupied 
by the appraisers, are placed by the collector in 
the custody of officers designated for the purpose, 
and known as storekeepers, who keep the keys of 
the building and personally superintend the open- 
ing and closing of the doors and windows. They 
must not permit goods to be received at the ware- 
house, nor to be sampled or packed, except in their 
presence, or the presence of some person desig- 
nated as an assistant by the collector, nor without 
a written order from the collector. They must 
keep an accurate account of all goods received, 
delivered and transferred, and of all orders for 
sampling, packing and repacking. They must also 
make daily returns of all business transacted, and 
must inform the collector of any infraction of the 
warehouse regulations, whether by inspectors or 
other persons. 

An ofifice for the accommodation of the owner or 



FEDERAL FINANCES. 8 1 

occupant of a warehouse is allowed, but the office 
must be separated from the rest of the store by a 
permanent partition. The office can be entered only 
from the outside, there being no connection between 
the office and the rest of the store. The object of 
this arrangement is to prevent the owner from hav- 
ing access to the store except when in company 
with an officer. 

When a merchant imports a cargo of goods which 
he does not wish to place immediately upon the 
market, he can store his merchandise in his own 
bonded warehouse, if he has one, or in a public 
bonded warehouse, by getting a permit in either 
case to do so, and by giving a bond to secure the 
payment of the duties. The bond is to the effect 
that if the merchandise be withdrawn within three 
years from the date of importation and the duties 
paid, then the bond is to be void. If merchandise 
is removed within a year after being placed in bond, 
then only the regular duties are imposed, but if it 
remains in bond longer than one year an extra 
charge of ten per cent, upon the regular duties is 
added. All merchandise placed in a bonded ware- 
house must be withdrawn within three years, or the 
goods will be sold to pay the duties. 

After the merchant has given bond and it has 



82 FEDERAL FINANCES. 

been approved, the collector will issue a permit, 
which must be signed by the naval officer, directed 
to an inspector directing him to send the goods to 
the warehouse named in the permit, with the ex- 
ception of such parts of the goods as may be desig- 
nated for examination and which are sent to the 
appraiser's store. When the samples designated 
by the collector on the permit, and ordered to the 
appraiser's store, shall have been reported as 
examined, the collector directs that they be re- 
turned to the warehouse where the goods oi which 
they are a part have been stored. 

When goods are conveyed from the vessels in 
which they were imported to the warehouse, they 
must be conveyed in bonded carts or lighters. The 
owners of these carts or lighters give bond to faith- 
fully convey m.erchandise from the wharves to the 
warehouses according to the prescribed regulations. 
On every bonded cart or conveyance there must be 
painted the name of the person or firm to whom 
the vehicle belongs and also the number of the 
custom house license. When conveying goods 
from a vessel to a warehouse these carts proceed 
with great regularity. The discharging inspector 
makes out a ticket describing the contents of a cart 
and gives it to the driver of the cart as he leaves 



FEDERAL FINANCES. 83 

the dock. This ticket is numbered, and the cart 
must appear in its proper turn at the warehouse. 
Upon delivery of the merchandise at the warehouse, 
the ticket must be signed by the storekeeper or 
other officer in charge, and be returned by the cart- 
man, who is required to deliver the receipt to the 
inspector in charge of the ship. 

Manufacturing bonded warehouses are used by 
manufacturers wha import certain dutiable goods 
that are used in making other articles which they 
export. A manufacturer of patent medicines has a 
right, under certain regulations, to import drugs 
free of duty to be used in the manufacture of the 
medicine he exports, but of course he cannot im- 
port drugs free of duty to be used in compounding 
medicines which are sold in this country. 

Now the government must have some means of 
ascertaining whether a manufacturer uses the arti- 
cles he imports only in making the articles he 
exports, or whether he uses part of the articles 
imported free of duty in the manufacture of goods 
which he sells in this country. To do this the gov- 
ernment requires that the manufacturer who desires 
to avail himself of the privilege of importing duti- 
able goods free of duty, must establish and main- 
tain a bonded manufacturing warehouse. To do 



84 FEDERAL FINANCES. 

this the manufacturer makes application to the col- 
lector of customs at the port where he proposes to 
engage in manufacturing, describing the nature of 
the business he. wishes to engage in, the kind of 
articles he intends to manufacture, and the kind 
of articles he intends to import and use. This 
application, accompanied by a bond, is sent to the 
Secretary of the Treasury. If he grants the appli- 
cation and approves the bond, the manufacturer 
may begin business at any time. These ware- 
houses are in the custody of the collector of customs, 
who assigns an officer to take charge of the build- 
ing. The salary of this officer must be paid by the 
company operating the warehouse. 

Before beginning operations, the proprietors 
must file with the Secretary of the Treasury a list 
of all the articles intended to be manufactured, and 
the names of the ingredients entering into their 
composition. The warehouse must also be ar- 
ranged according to the regulations prescribed by 
the Treasury Department. The building must be 
divided into two main compartments, one of which 
must be used exclusively for the storage of the 
imported articles used in manufacturing goods for 
export, and the other must be used exclusively for 



FEDERAL FINANCES. 85 

the storage of articles that are manufactured and 
put up for export. 

When the manufacturer imports dutiable goods 
free of duty to be used in his warehouse, he must 
give a bond that the imported merchandise will be 
exported in manufactured articles within three 
years from the time of importation. Unless the 
articles thus imported are exported within the time 
named, the manufacturer must pay the duty on them. 

When the manufacturer desires to withdraw 
articles from the warehouse for exportation, he 
makes out an entry for withdrawal, naming and 
numbering packages and giving their value. He 
must then swear to a statement that the merchan- 
dise described in the entry is truly intended to be 
exported to a foreign country. In addition to this 
he must give bond that he will ship the merchandise 
to a foreign country. The bond is given for twice 
the value of the goods, and the condition is that if 
the merchandise be actually exported and landed 
abroad, then the obligation is to be void, otherwise, 
to remain in force. The evidence of having landed 
such goods in a foreign country is required before 
the bond is canceled. 

Transportation in bond is a system by which mer- 
chandise is transported from a warehouse in one 



86 FEDERAL FINANCES. 

collection district to a warehouse in another district, 
and it is also the system by which merchandise is 
transported from a port of entry at the sea coast to 
an inland custom district. Common carriers, such 
as railroad and transportation companies, in order 
to convey dutiable merchandise from one collection 
district to another, must give security in the nature 
of a general transportation bond. This bond must 
be signed by two sureties and conditioned that the 
company will transport and deHver all merchandise 
received by them for transportation in bond to the 
proper officer of the customs at the place of desti- 
nation. 

By this system, when goods arrive by vessel in 
New York, consigned to a firm in St. Louis, they 
can be sent without appraisement and without de- 
lay straight through to St. Louis. This is called 
immediate transportation in bond. Merchandise 
can also be shipped from Europe through the United 
States in bond to Mexico or Canada. If goods are 
shipped by car load, each must be fastened and 
sealed. Goods shipped in smaller quantities, such 
as barrels, casks, bales and packages, must be 
corded and sealed. On the arrival of the merchan- 
dise at the last port in the United States, just be- 
fore entering the foreign territory to which they are 



FEDERAL FINANCES. ^^ 

consigned, they are stopped for the purpose of in- 
spection. If the collector at this last port finds that 
the merchandise corresponds with the manifests of 
the same, and that the seals of the cars and pack- 
ages are all in good condition and have not been 
tampered with, he issues a certificate permitting the 
goods to pass out of the United States and be taken 
on their way to the place of destination. 



CHAPTER VIII. 

APPRAISEMENT AND PAYMENT. 

Whenever merchandise arrives within a port of 
entry the duties become due at once, and the gov- 
ernment immediately takes steps to insure the 
payment of the same. The liabihty for duties, 
attaching on importation, constitutes a personal 
debt to the United States, which can be enforced 
against the importer if he is worth enough to make 
the collection good. If not, the government con- 
siders that it holds a lien upon the imported goods 
until the duty is paid or the importer gives an ap- 
proved bond guaranteeing the payment of the same. 

The first thing done after merchandise has been 
landed is to appraise it for the purpose of assessing 
the correct duty. Section 2902 Revised Statutes 
provides that: " It shall be the duty of the ap- 
praisers of the United States, and every of them, 
and every person who shall act as such appraiser, 
or of the collector and naval officer, as the case 
may be, by all reasonable ways and means in his or 
their power, to ascertain, estimate, and appraise 
the true and actual market-value and wholesale 



FEDERAL FINANCES. 89 

price of the merchandise at the time of exporta- 
tion, and in the principal markets of the country 
whence the same has been imported into the 
United States. " 

Herein is one of the great difficulties of properly- 
assessing the value of imported merchandise. It is 
hard to get at the first wholesale cost of goods 
manufactured in a foreign country. The result is • 
that the appraiser usually goes by the invoice price. 
But a much greater difficulty lies in the way of 
correct appraisement than that of ascertaining the 
first cost of the article. It is the trouble that 
appraisers sometimes experience in properly classi- 
fying some articles. While the tariff schedule is 
very complete, and names almost all kinds of mer- 
chandise, yet it often happens that it is difficult to 
tell under what head to class a manufactured article. 

The rule in such cases is that when an imported 
article is not enumerated it must pay the same duty 
as the article it most resembles, and if two or more 
rates of duty shall be applicable to any imported 
article, it shall pay duty at the highest of such rates. 

As an illustration of the strange things that hap- 
pen in attempting to classify some articles, it is only 
necessary to refer to such a common article as 
beans. Common vegetable beans were not men- 



go FEDERAL FINANCES. 

tioned in the tariff law of 1883, and for several 
years there was much difficulty experienced in 
endeavoring to classify them. The question was 
whether beans were to be classed as garden seeds 
or as vegetables, or whether they should come in 
free of duty under the provisions of paragraph 636. 
If they were garden seeds they were dutiable at 
20 per cent., but if they came under the head of 
vegetables, then the duty was only 10 per cent. 
The department decided, November 27, 1883, that 
beans were exempt from duty. On March 28, 
1884, the department made another decision, hold- 
ing that beans were dutiable af 20 per cent, ad 
valorem. Again, on June I, 1885, another decision 
was made, this time that beans were dutiable at 10 
per cent, ad valorem as vegetables. Strange as it 
may seem, all these decisions were under the same 
law. 

Under the same tariff law much trouble was ex- 
perienced in properly assessing the duty on im- 
ported albums. There was a duty on paper, a 
duty on leather and a duty on metal, but albums 
were not specified. They were finally made duti- , 
able under the head of paper as that was the chief 
material of which they were composed. The new 
tariff law of 1890, however, provides for a duty on 



FEDERAL FINANCES. 9 1 

beans and also on albums. These instances are 
given merely to show the difficulties the appraisers 
and inspectors experience in properly classifying 
merchandise. 

The new law of 1890 makes elaborate distinctions 
in different grades of wool. The appraisers are 
finding great difficulty in deciding to what class 
certain grades of wool belong. By referring to 
section 375 of the tariff schedule the reader will 
see that wool is divided into three classes. To aid 
the appraisers in classifying and assessing the value 
of wool, the Secretary of the Treasury furnishes 
them with samples of each of these three grades. 
Even with the help of these standards the ap- 
praiser is often at a loss to know under what class 
to place some of the wools that are imported. But 
this is not all his trouble, llnder the sorting 
clause of the tariff act (see paragraph 383) it is pro- 
vided that when wool has been sorted or increased 
in value by the rejection of any of the original 
fleece it shall be subject to twice the duty to which 
it otherwise would. The manufacturers of woolen 
goods claim that this sorting clause does not apply 
to third-class wools, because they are already a 
low grade wool, and rejecting some of the coarser 
parts should not subject this grade of wool to the 



g2 FEDERAL FINANCES. 

penalty of paying the extra duty. The manufact- 
urers, of course, are interested in procuring wool 
as cheaply as possible. 

It will be seen by referring to paragraphs 385 and 
386 of the tariff law, that wools of the third class, 
worth only thirteen cents per pound, shall pay a 
duty of 32 per cent., while wools of the third class, 
worth more than thirteen cents per pound, shall be 
subject to a duty of 50 per cent. Now, the object 
of the importer is to sort the wool worth more than 
thirteen cents per pound into two parts, one of 
which will be worth a little less than thirteen cents 
per pounS, and the other, a Httle more than that 
price. By this arrangement he is able to bring in 
part of his wool at a duty of 32 per cent., and the 
other part, at a duty of 50 per cent., whereas, if he 
had imported the wool without sorting it into two 
classes, he would have had to pay 50 per cent, on 
the whole amount. But the sorting clause of para- 
graph 383 says, that the part of the wool increased 
in value by the rejection of the poorer part, shall be 
subject to twice the regular duty. If this is enforced 
against the third-class wools, the importer would 
have to pay a duty of 100 per cent., instead of 50 
per cent, on the part worth more than thirteen cents 
per pound. It is to the interests of importers and 



I 



FEDERAL FINANCES. g j 

manufacturers to secure wool as cheaply as possible, 
and hence the reason for their claim that third class 
wools should not be subject to the provisions of the 
sorting clause. On the other hand, the wool- 
growers are interested in keeping up as high a tariff 
as possible on wool, and they insist that the sorting 
clause applies to the third-class wools. There is a 
great deal of wrangling going on about the matter, 
both sides trying to befuddle the appraisers and 
collectors, who are having a hard time to interpret 
the meaning of the tariff schedule in reference to 
wool. Up to date, the matter has not been defi- 
nitely settled, and it will probably take two or three 
decisions of the Treasury Department before the 
question is properly settled. This subject of third- 
class wools and the sorting clause, will show the 
reader the complications and difficulties in the way 
of classifying and assessing the duty on some articles. 
After the merchandise is appraised and the duty 
assessed, if the owner is dissatisfied with the classi- 
fication and valuation he may appeal to the board 
of general appraisers. The general appraisers are 
nine in number and are appointed by the President. 
They have a general supervision over appraise- 
ments and classifications, for duty, of imported 
merchandise. If the importer is dissatisfied with 



94 FEDERAL FINANCES. 

the decision of the board of general appraisers he 
may, within thirty days after such decision, apply 
to the Circuit Court of the United States within the 
district in which the matter arises, for a review of 
the questions of law and facts involved in such 
decisions. The court then orders the board of 
appraisers to return to the said Circuit Court the 
record and evidence taken by them, together with 
a certified statement of the facts involved in the 
case, and their decision in the matter. The court 
then proceeds to hear and determine the questions 
of law and facts involved in the decision made by 
the appraisers. The decision of the court is final, 
unless the court shall be of the opinion that the 
questions involved are of such importance as to 
require a review of such decision of the Supreme 
Court of the United States, in which case the court 
or the judge making the decision may allow an 
appeal to be made. 

In addition to ascertaining the value of imported 
merchandise, the appraiser, in assessing duties, must 
sometimes take into consideration what is known as 
tare, wantage, leakage and draw^back. Tare is an 
allowance for the weight of the box, cask, bag or 
package containing the dutiable article. Wantage 
or leakage is a deduction made from the amount 



FEDERAL FINANCES. ^c 

stated in the invoice when there is proof of loss in 
quantity having been sustained by reason of break- 
age or leakage. Drawback is an allowance for im- 
ported goods upon which a duty has been paid, 
when used in manufacturing an article that is ex- 
ported. A drawback is allowed on salt which has 
been imported and is used in curing meats, upon 
proof that the meat has been exported. The im- 
porter first pays the duty on the salt, but afterward, 
when it is again exported as part of cured meats, 
the duty is refunded. In the same way a drawback 
is allowed on imported tin plate used in the manu- 
facture of cans and boxes when exported. 

All duties upon imports must be collected in ready 
money, and paid in coin or in United States notes, 
payable on demand. If a bond is given to insure 
the payment of duties, merchandise may be stored 
in a bonded warehouse, and the duties paid on 
removing the goods therefrom, which must be 
within a period of three years. 



CHAPTER IX. 

HOW DUTIES ARE COLLECTED. 

Th£ collection of tariff duties being a subject 
but little understood, the object of this chapter will 
be to take up the scattered threads of information 
as given in previous chapters of this book, and 
weave them into an account of an importation of 
merchandise, illustrating by this means the methods 
employed in collecting the customs tax. For this 
purpose let us follow a ship load of merchandise 
from a foreign port to this country, and follow the 
cargo through the custom house until the duties 
are paid, and then, returning to the wharf, let us 
watch the passengers and immigrants on an incom- 
ing steamer from the time the vessel lands until the 
traveler's baggage is examined and the duties paid. 

The foreign merchant wishing to ship goods to 
his agent, or to an importing merchant in this 
country, must make out an invoice of the merchan- 
dise he wishes to export and then go before the 
United States consul, who resides in the country 
from which the goods are to be shipped, and make 
oath that the invoice is a correct statement of the 
96 



FEDERAL FINANCES. gj 

merchandise he intends to export. This affidavit, 
when indorsed by the consul, is called a " consular 
certificate," and is attached to the invoice. Three 
of these invoices are made out, one of which is 
kept by the consul, one sent to the collector of the 
port to which the goods are being shipped, and the 
other one given to the exporting merchant who 
sends it to the importing merchant in this country. 
The invoice, with the consular certificate, which 
goes to the collector of the port to which the goods 
are consigned, is taken by the captain of the vessel 
carrying the freight. The captain attaches the in- 
voice to his clearance papers and other ship docu- 
ments, and calls the whole his " manifest." 

There is seldom any difficulty about the foreign 
merchant finding an American consul to approve of 
his papers, because there is hardly a foreign sea- 
port but has a resident United States consul. If 
there is no consul living at the port from which the 
merchandise is to be shipped, then the foreign mer- 
chant may go before the nearest resident consul, or 
he may enter his goods on what is known as a " pro- 
forma" invoice, which is explained in another chap- 
ter of this book. • 

When the vessel, laden with her cargo, nears the 
United States, and comes within four leagues of the 

7 



^8 FEDERAL FINANCES. 

shore, its first experience is with the revenue cut- 
ters which patrol the coast. If our incoming ship 
is in the beaten track and is headed for some port 
of entry, the revenue cutter that it meets will prob- 
ably let the vessel pass on its way with no more 
attention than having been carefully scrutinized 
through the spy-glass of the naval officer in com- 
mand of the revenue cutter. If, however, the mer- 
chant vessel should be out of the regular course, or 
should the officers on board the government boat 
have any reason to suspect the approaching ship, 
up would go the revenue flag and the vessel would 
be signaled to stop. If the signal should be un- 
noticed or unheeded, the revenue boat would fire a 
gun as a more emphatic signal for the visitor to 
come to a halt. 

When the approaching vessel comes to a stop, or, 
what is more generally the case, slackens her speed, 
officers are sent from the revenue cutter to board 
the merchant ship. If everything is found to be all 
right, the vessel is permitted to go on its way. But 
if the ship's manifest is not regular, and there is 
reason to suppose that crooked work may be going 
on, the^naval officers accompany the vessel to a port 
of entry and turn her over to the proper authorities. 

Whether or not our vessel is stopped out at sea 



FEDERAL FINANCES, gg 

by a revenue cutter, it must come to a halt when it 
reaches quarantine, which is always situated at the 
outer entrance of a United States seaport. After 
the inspection of the crew and passengers, if no in- 
fectious diseases be found among the number, the 
vessel is allowed to enter the harbor. But the 
vigilance of the government is not yet exhausted. 
Besides passing the revenue cutters, which act as 
sentinels outside the harbor, and besides being de- 
layed at quarantine to undergo a searching exami- 
nation by the health officers, the vessel is yet to 
meet one of the little revenue tugs or " boarding 
vessels " as they are called, which are always on 
duty at important ports of entry. 

As soon as the incoming vessel appears in the 
harbor the little revenue tug steams up and dashes 
out to meet the visiting ship. Swinging gracefully 
around, the revenue tug takes after the big vessel 
and pulls up alongside of it, both boats running 
slowly and in the same direction. A ladder is 
pushed from the pilot house of the tug to the deck 
of the ship, and in a twinkling two inspectors are 
aboard the merchant ship. The ladder is with- 
drawn, and the revenue tug slips quickly away and 
goes to meet another vessel, if there be one in sight, 
or returns to its pier. 



lOO FEDERAL FINANCES. 

The inspectors placed on board the ship accom- 
pany the vessel to its landing place. Their business 
is to see that nothing is taken from the ship except 
in the regular way as provided by law. From the 
time these inspectors are placed on board the ship, 
the vessel and its cargo are under the charge of 
these customs officials or other inspectors who take 
their places to relieve them at night, until the vessel 
is unloaded and the customs duties assessed and 
paid, or until payment is guaranteed 

When the vessel arrives the captain immediately 
goes to the custom house and has his ship entered. 
He deHvers to the collector his manifest, which, be- 
sides containing his clearance papers and a list of 
his crew and passengers, if there should be any, 
also includes the invoice of goods sent to the mer- 
chant in this country, which, it will be remembered, 
was indorsed by an American consul in a foreign 
port before the goods were shipped to this country. 
The captain must make oath that his manifest is in 
every way correct, to the best of his knowledge 
and belief. These formalities having been gone 
through with, the collector issues a general order 
for the delivery of the cargo. But before the im- 
porting merchant or consignee can secure his goods 
he must go before the collector and secure a per- 



FEDERAL FINANCES. lOI 

mit allowing him to unload his freight from the 
vessel. To do this he takes the invoice and the 
bill of lading, which the exporting merchant in the 
foreign port has sent him, and attaches them to the 
bill of entry which he receives from the captain of 
the vessel. Armed with these documents he, or 
his agent, goes before the officials at the custom 
house and makes oath that he has certain merchan- 
dise on board the vessel, and he proceeds to verify 
the same by producing his invoice and bills of lad- 
ing and entry. The invoice he produces is then 
compared with the invoice which the consul resid- 
ing in the country from which the goods were 
shipped sends to the collector by the captain. The 
bill of entry which is presented by the importing 
merchant is also compared with the bill of entry 
which the captain gives to the collector at the same 
time that he does his manifest. These papers are 
then taken to the naval office, where the clerical 
work is verified. The importer then returns to the 
custom house where all the papers are again com- 
pared by the collector or deputy, who indorses the 
papers if they are found to be regular, and makes 
what is known as an " estimate " of the amount of 
duties that should be paid. He also designates 
certain packages that must be sent to the public 



I02 FEDERAL FINANCES. 

stores for appraisement in order that duties can be 
accurately ascertained. The importer then goes 
to the cashier's desk and pays the estimated duty 
on the articles he wishes to transfer immediately to 
his store, or ship to other merchants in the interior 
of the country. He then gets two permits, one is 
an order to allow him to have immediate posses- 
sion of the goods upon which he has paid a duty, 
and the other is an order to allow him to remove 
the goods on which he has not paid the duty to a 
bonded warehouse. The importer leaves all these 
papers at the collector's office except his permit. 
He is now ready to demand possession of his mer- 
chandise. 

If all his goods are for immediate consumption, 
and he has paid the duty on them, he hands the 
permit to receive the goods to one of the inspectors 
in charge of the vessel, under whose supervision all 
imported freight is unloaded. The articles of mer- 
chandise are then transferred from the ship to the 
wharf, and the owner is allowed possession. If the 
duty has not been paid on all or part of the goods, 
the merchant hands the other permit or order, 
called a " warehouse permit," to the inspector in 
charge of the vessel, and the owner is allowed to 
take his goods to a bonded warehouse. But he is 



FEDERAL FINANCES. IO3 

required to transfer his freight from the wharf to 
the warehouse in what are known as " bonded 
carts." These carts and drays are owned by com- 
panies who are under heavy bonds to the United 
States not to allow any merchandise to be taken 
from the carts Avhile in transit from the wharf to 
the warehouses. 

Heavy freight is usually appraised on the wharf, 
but lighter and more expensive articles are usually 
appraised at the public store. For the purpose of 
appraisement at the public store, about one box, 
crate or package in ten is selected. After the 
goods have been appraised and the rate of duty 
ascertained, the inspectors and appraisers report 
the same to the collector's office. The clerks at the 
custom house then figure out the duty on the whole 
amount of merchandise, of which the samples were 
only a part. But whether appraised on the wharf 
or from samples sent to the pubHc store, th-e owner 
of the goods is then notified of the full amount of 
duty he owes on his entire importation. It will be 
remembered fhat when the importer received an 
order to have his goods delivered to him, that he 
paid an estimated duty at that time. If, now, after 
appraisement, it is found that he paid too much, 
the amount in excess of the correct duty is returned 



:04 FEDERAL FINANCES. 

to him. If, however, the estimated duty was too 
low, he is required to make the difference good. 
When this is done he is permitted to take the sample 
goods away from the public store. But these 
samples, always enough to cover the full duty on 
the whole importation, are kept until all duties are 
paid. When goods are inspected on the wharf the 
samples are kept there until full settlement is made 
with the collector at the custom house. If the duty 
is not fully paid by the estimated duty and the im- 
porter should refuse to pay thfe full duty, as 
ascertained by inspection and appraisement, the 
samples are then removed to the public store and 
sold for costs. 

The merchandise which the importer stores in a 
bonded warehouse remains in the care of the 
government until the importer desires to take it 
out. Part or all of the goods can be taken out at 
any time by paying the required duties thereon. 

Merchandise shipped into this country by way of 
Canada and Mexico, as railway freight, must under- 
go the same forms and regulations as here de- 
scribed , except those which are strictly of a maritime 
nature. 

But there is another class of duties of which we 
have not yet spoken, and that is the duties collected 



FEDERAL FINANCES. IO5 

on the passenger's baggage. Tourists and return- 
ing citizens of this country are allowed to bring 
with them a certain amount of baggage, as provided 
by law, but all articles in excess of the prescribed 
amount must pay the regular duty. This duty is 
collected in a different manner than duties on im- 
ported merchandise which comes as freight. 

When the inspectors board the vessel, as has 
been described, one of their duties is to assemble 
the passengers in the saloon and put them in readi- 
ness to leave the ship as soon as it enters the 
dock. The inspectors seat themselves at a table, 
and, as the passengers file past them, one of the 
inspectors fills out a blank " declaration," writing 
in the name of the passenger and the number of 
his valises, packages and trunks, and the passenger 
also declares whether he has any dutiable goods. 
The passenger swears to this statement or " declar- 
ation," as it is called, and then signs it. The other 
inspector checks off his name from the list obtained 
from the captain, and numbers the declaration to 
correspond with the number on the list. The pas- 
senger is given a ticket numbered to correspond 
with the number in the declaration, and also a 
label, on which is written the initial letter of his 
name. This is to be fastened to his baggage. 



I06 FEDERAL FINANCES. 

There is then a great scramble among the passen- 
gers to get their baggage in readiness to be taken 
from the ship. If there be many passengers aboard, 
the upper deck is soon so thickly covered with 
trunks, boxes, valises and packages, that one must 
climb over them to get from one part of the deck 
to another. The passengers stand huddled to- 
gether in small groups, penned in by the piles of 
baggage heaped up on every side. When the ship 
touches the pier the gangway is run from the dock 
up to the deck of the ship, and the passengers 
pour down the walk to find themselves in a covered 
depot which usually extends the whole length of 
the ship's pier. 

While the ship has been slowly coming up the 
harbor and entering the dock there have been 
other preparations made, especially in the large 
ports, for receiving the passengers, beside what has 
been going on aboard the vessel. A detachment 
of inspectors has been detailed from the custom 
house to meet the passengers in the ship's depot 
and aid the two inspectors, who came in* with the 
ship, in examining the baggage and collecting 
duties on the same. 

These inspectors, who are sent from the custom 
house, aided by two or three policemen, are drawn 



FEDERAL FINANCES. I07 

Up in line at the further end of the long depot where 
the ship lands, and as the passengers enter at the 
other end they find themselves confronted by a row 
of uniformed officers. The two inspectors, who 
were placed on board the vessel when it first 
entered the harbor, soon follow with a list of the 
passengers and declarations in hand. They move 
forward and stand by a small desk or table directly 
in front of the line of officers stretched from one 
side of the hall to another. The baggage by this 
time has been removed from the vessel and brought 
to the depot. The sides of the shed are marked 
with big letters arranged alphabetically, and bag- 
gage is placed under or near the letter on the wall 
corresponding to the initial letter on the baggage. 
If there should be a good many passengers whose 
names begin with B, then there will be a large pile 
of baggage gathered near the big B on the wall. 
As soon as a passenger's baggage is brought to- 
gether he notifies the staff officer, and gives him 
the ticket which he received from the inspectors on 
board the vessel. The number of this ticket cor- 
responds with the number of the passenger's dec- 
laration, and also with the tag which was fastened 
to his baggage just before removal from the ship. 
The chief officer calls an inspector out of the line, 



I08 FEDERAL FINANCES. 

gives him the passenger's declaration, and sends 
him with the passenger to examine his baggage. 
After having examined the baggage, if no dutiable 
goods are found, it is marked accordingly. This is 
done by pasting a small check on the article exam- 
ined. If the passenger in his declaration acknowl- 
edged that he had any dutiable goods in his pos- 
session these are produced, appraised, and the 
duty collected. At one side of the depot there is a 
small ofifice bearing the sign " Custom House." In 
this office is a clerk of the customs department, who 
receives the duties assessed and marks them paid. 
If any dutiable articles are found in the passenger's 
baggage which are not mentioned in his declara- 
tion, they, too, are appraised, and the inspector 
marches the careless passenger back to the clerk's 
office, and he must pay the duty. If, however, the 
articles are of considerable value, and there has 
been an evident intention on the part of the pas- 
senger to conceal the articles, the goods are seized 
and sent to the seizure room at the custom house 
for appraisement. The owner will now find some 
difficulty in securing his property, for he is obliged 
to pay an increased duty and perhaps a fine before 
he can obtain possession of the seized articles. 
As soon as a passenger's baggage is examined 



FEDERAL FINANCES. lOQ 

and marked as all right, he is given back his decla- 
ration, signed by the inspector and also by the clerk 
who is on duty in the little branch custom house, 
if any duties have been paid. This declaration, 
properly signed, the passenger presents to the chief 
officer at his desk in the front end of the depot, 
who checks off the name. Then the returning 
traveler to this country or the tourist from a foreign 
country is allowed to depart in peace, taking his 
effects with him. 

The immigrants, or steerage passengers, if there 
should be any aboard, are not landed at the depot 
with the cabin passengers, but are taken to a 
different place, for the reason that the rules and 
regulations admitting immigrants to this country 
are much different than the forms attending the 
admission of the cabin passengers, who are usually 
tourists or citizens of this country returning from a 
trip abroad. This arrangement is also of great con- 
venience to the immigrants, many of whom cannot 
speak a word of English. As they come from the 
four quarters of the globe it would be impossible, 
at the large seaports, to keep interpreters at all the 
wharves of the various steamship companies. If it 
should be at New York City, our immigrant will 
find himself, when he lands, in a spacious hall, in 



no FEDERAL FINANCES. 

which he can buy relreshments, and rest. This 
depot which the immigrant enters is the new Castle 
Garden at Ellis Island. The first space which the im- 
migrant enters is the rotunda which leads to the gate 
which the new-comer must pass before he can enter 
the promised land. To do this he must satisfactorily 
pass the examination of the inspectors. At one end 
of this large hall or room there is a narrow passage or 
railingleading down into the room in which the immi- 
grant's baggage is placed. About middle way of 
this narrow passage are two inspectors, one of whom 
has a large book before him in which he writes the 
name, age, nationality and occupation of each one of 
the immigrants as they slowly file through the narrow 
passage-way. The immigrant is also asked how 
much money he has with him, and is required to show 
it if the inspectors think there is any doubt about him 
having the amount that he claims. The immigrant 
is further questioned in regard to where he is going, 
whether or not he has any friends at the place to 
^^hich he is going, and what his intentions are when 
he gets there. If the new-comer should be in des- 
titute circumstances, or should the inspector have 
cause to think that the new-comer would soon be- 
come a charge upon the charities of this country, 
it is the duty of the examining ofificer to turn the 



FEDERAL FINANCES. 1 1 1 

immigrant back, and refuse to allow him to pass 
through the narrow railing which leads to the 
United States. The law is not enforced as it should 
be, and many are allowed to slip through the railing 
who should be returned to the country whence 
they came. 

The immigrant having registered and passed 
through the railing is allowed to go below and at- 
tend to his baggage. This is examined and passed 
upon much in the same way as is the baggage at the 
passenger depot which we have just described. 
This attended to, the immigrant is allowed to go on 
his way rejoicing. 



CHAPTER X. 

DISCRIMINATING DUTIES AND RECIPROCITY. 

It has long been the practice of the United 
States government to discriminate in reference to 
tariff duties between foreign countries, favoring 
those who by treaty grant this country special 
privileges. It has also been the practice of this 
government to make a discrimination in favor of its 
own citizens. As early as 1817 Congress passed 
the following law which is still in force: 

" No goods, wares or merchandise, unless in 
cases provided for by treaty, shall be imported into 
the United States from any foreign port or place, 
except in vessels of the United States, or in such 
foreign vessels as truly and wholly belong to the 
citizens or subjects of that country of which the 
goods are the growth, production or manufacture; 
or from which such goods, wares or merchandise 
can only be, or most usually are, first shipped for 
transportation." (R. S. 2497.) 

A limitation is placed upon the foregoing law by 
the reciprocity clause passed at the same time, J 
which provides that: 



FEDERAL FINANCES. I i 3 

'' The preceding section shall not apply to vessels 
or goods, wares or merchandise, imported in ves- 
sels of a foreign nation which does not maintain a 
regulation against vessels of the United States. '\ 
(R. S. 2498.) 

The President was given the power to suspend 
tonnage duties as early as 1828. By the law passed 
in that year, and subsequently amended in 1830, 
provision is made whereby, upon satisfactory proof 
being given to the President by the government of 
any foreign nation, that no discriminating duties 
of tonnage or imposts are imposed or levied in the 
ports of such foreign nation upon vessels wholly 
belonging to citizens of the United States, or upon 
the produce, manufactures or merchandise imported 
into the same from the United States, the President 
may issue his proclamation , declaring that the United 
States suspends all discriminating duties of tonnage 
upon the vessels of such foreign nation and the prod- 
uce or merchandise imported into the United States 
from such country. 

In June, 1872, Congress passed a discriminating 
duty often per centum ad valorem, in addition to 
the regular duties on goods produced east of the 
Cape of Good Hope when imported from west of 



114 



FEDERAL FINANCES. 



that point. This law was, however, repealed Jan- 
uary I, 1883. 

In 1864 the following was enacted: 

" The discriminating duty of ten per centum ad 
valorem, in addition to the duties imposed by law, 
shall be levied, collected and paid on all goods, wares 
and merchandise which shall be imported in vessels 
not of the United States; but this discriminating 
duty shall not apply to goods, wares and merchan- 
dise which shall be imported in vessels not of the 
United States, entitled, by treaty or any act of 
Congress, to be entered in the ports of the United 
States, on payment of the same duties as shall be 
paid on goods, wares and merchandise imported in 
vessels of the United States." 

The foregoing provisions in regard to discrimina- 
tions in duties and reciprocity treaties do not mean 
that should a foreign country open its ports to the 
free entry of American products, that this govern- 
ment would then reciprocate by throwing off all 
duties on imports from that foreign country. If 
that was the meaning, we would now be allowing 
the manufactured goods of England to enter our 
ports free of duty, because that country long ago 
repealed all duties on the principal products im- 
ported from this country. 



FEDERAL FINANCES. I I c 

Briefly stated, it means that this country will not 
charge any foreign country more than the regular 
tariff rates, as regulated by law, provided that such 
foreign country does not discriminate against the 
United States, by imposing a higher duty on im- 
ports from this country than they do on merchan- 
dise imported from other countries. And in refer- 
ence to tonnage duties, it simply means that we 
will not tax the ships of one country more for 
entering our harbors than we do the ships of any 
other country, provided that country extends to us 
the same courtesy. 

Vessels belonging to the following nations are 
admitted, under the provisions of law, treaties of 
commerce and navigation, or conventions, into the 
ports of the United States on the same terms as the 
vessels of the United States, with the produce or 
manufactures of their own or any other country, as 
respects both tonnage and impost duties. That is, 
merchandise brought here in ships belonging to 
these countries, can be entered on the same footing 
as if it had been brought in ships belonging to 
citizens of the United States. 

Belgium— Treaty of March 8, 1875. China— By 
proclamation of the President, November 23, 1880. 
Denmark — Treat/ of April 26, 1826. France — 



I 1 6 FEDERAL FINANCES. 

Treaty of June 24, 1822. Discriminating duties on 
merchandise from France abolished by President's 
proclamation of September 22, 1873, Greece — 
Treaty of December 10, 1837. Liberia — Treaty of 
October 21, 1862. Madagascar — Treaty of May 
13, 1 88 1. Netherlands — Treaty of August 26, 
1852. Ottoman Empire — Treaty of February 25, 
1862. Russia — Treaty of April 5, 1824. Sweden 
and Norway — Treaty of July 4, 1827. 

Austria — The first treaty with Austria was signed 
August 27, 1829. By the treaty of July II, 1870, 
the part which refers'to duty and tonnage provides 
that the judicial authorities and custom-house 
officials shall, in no case, proceed to the examina- 
tion or search of merchant vessels without previous 
notice to the consular authority of the nations to 
which the said vessels belong, in order to enable 
them to be present. Notice to consulates of the 
taking of the depositions of captains or seamen 
before local authorities is also required. In the 
event of a vessel of either nation " being wrecked 
or cast on shore upon the coast of the other, all mer- 
chandise or goods not destined for consumption in 
the country in which the wreck takes place are free 
of all duties." Consulates may hoist their flag on 



FEDERAL FINANCES. nj 

board any vessel employed by them in port for the 
discharge of their duty. 

Borneo — By treaty, June 30, 1850. Under this 
treaty no duty exceeding one dollar per registered 
ton is levied on vessels of the United States enter- 
ing the ports of Borneo, the said tonnage duty 
being in lieu of all other charges or duties whatso- 
ever, 

German Empire — By treaty of December 11, 
1871. The stipulations of this treaty in reference 
to trade and commerce are about the same as the 
provisions of the treaty between Austria and the 
United States above given. The seventeenth article 
provides that^ " With regard to the marks of labels 
of goods, or of their packages, and also with regard 
to patterns and marks of manufacture and trade, the 
citizens of Germany shall enjoy in the United States 
of America, and the American citizens shall enjoy 
in Germany, the same protection as native citizens. " 

Great Bi*itain and her possessions — By treaty of 
July 3, 1815, October 20, 1818, and August6, 1827, 
the commercial relations of Great Britain and the 
United States are very close, and the provisions of 
the treaty in respect to trade are very full. British 
vessels and their cargoes from any part of the world 
may enter the ports of the United States on the same 



jl8 FEDERAL FINANCES. 

terms, as respects duties and tonnage, as the vessels 
of the United States. 

For some time there was a dispute as to whether 
the provisions of the United States law, assessing 
an extra ten per cent, on merchandise from points 
east of the Cape of Good Hope when shipped from 
points west of there, appHed to merchandise from 
British India when taken to England and then 
shipped to this country. It was decided by the 
owners of the British vessels going into the courts 
of the United States, where they gained a victory. 
The Circuit Court of the United States decided that 
British vessels bringing from British ports in Eu- 
rope, articles of the growth, produce or manufact- 
ure of the British possessions in India, were not 
liable, under our treaty with Britain, to the penal- 
ties of the extra ten per centum ad valorem duties. 
By treaty of May 8, 1871, the common enjoyment 
of the sea-fisheries on the coasts of the United 
States and of the British North A merican Provinces, 
by American citizens and British subjects, is pro- 
vided for. Reciprocal transit through the territory 
of each government on this continent is also pro- 
vided for. 

Italy — By the treaty with Italy, signed February 
26, 1 87 1, a generous policy of commercial liberty 



FEDERAL FINANCES. \ \ g 

is mutually assured each country. By the terms of 
this treaty not only are the vessels of each country 
granted the same privileges as the other, but the 
vessels of either country may also export and re- 
export from the other and any foreign port on the 
same terms and with the same bounties, duties and 
drawbacks as those belonging there. Vessels of 
either nation, wrecked, foundered, or damaged on 
the coast of the other, may unload and re-load 
there, without paying duties, except on articles left 
for consumption. Vessels of either nation may also 
complete crews on the territory of the other on cer- 
tain conditions. The following vessels are exempt 
from tonnage, anchorage, and clearance duties, to 
wit: Those entering and leaving again in ballast. 
Those passirpg from port to port to discharge or take 
in or complete cargo, on proof of having already 
paid such duties. Those which, being loaded, enter 
port, and leave it without disposing of any part 
of their cargoes or completing cargo at that place. 
No vessel of the one country, compelled to enter 
a port of the other to be regarded as trading if 
it merely breaks bulk for repairs, transfers cargo on 
account of unseaworthiness, purchases stores, or 
sells damaged goods for re-exportation only. 



I 20 FEDERAL FINANCES. 

When damaged goods are sold for internal con- 
sumption, however, customs must be paid. 

Japan — Under the treaty of July 29, 1858, vessels 
of the United States may enter the ports of Simoda, 
Hakodadi, Nagaski, Kanagawa, Nee-e-gata and 
Hiogo. By the provisions of the treaty of March 
31, 1854, Japan is to extend to the United States 
and the citizens thereof any privilege or advantage 
granted in future to any other nation. By the terms 
of the treaty of January 28, 1864, certain articles 
used in preparation and packing of teas are to be 
admitted in Japan free of duty, and certain other 
speciried articles at a reduced duty of five per centum. 

Persia — By treaty of December 13, 1856, citizens 
of the United States and subjects of Persia may 
reciprocally bring by land or by sea into, or export 
from, either country all kinds of merchandise and 
products, and sell, exchange or buy and transport 
the same to all places therein, subject, however, to 
the duties and regulations prescribed by the laws 
of the country in which such commerce is carried 
on. Any other privilege concerning such internal 
commerce in future granted to any other nation by 
either party, to be also granted to the merchants 
of either nation engaged in such internal commerce 
within the territories of the other. Import and 



FEDERAL FINANCES. i 2 1 

export duties to be on the footing of the most 
favored nation ; and no exceptional tax, under any 
name or pretext whatever, to be collected in either 
country on the merchandise or products of the 
other. 

Spain — Under the act of Congress, March i, 
1869, and by reason of the subsequent action of 
the Spanish government, all discriminating ton- 
nage duties on Spanish vessels were abolished, 
whether the vessels come from Spain or the 
islands of Cuba and Porto Rico. By proclamation 
of the President, dated December 19, 1871, mer- 
chandise imported into the United States in Spanish 
vessels from elsewhere than the islands of Cuba and 
Porto Rico was also relieved from the discriminating 
impost duty of ten per centum ad valorem which 
had previously been collected. The discriminating 
impost duty remained in force upon merchandise 
brought in Spanish vessels from Cuba and Porto 
Rico, until, by the treaty of 1 891 , all discriminating 
impost duties on cargoes in Spanish vessels from 
these islands were discontinued. 

South America — For a good many years the 
United States has maintained reciprocal relations 
with nearly all the South American republics. The 
treaties with these states were all of about the same 



122 FEDERAL FINANCES. 

tenor, and permitted vessels of these countries to 
come into the ports of the United States on the 
same terms as vessels of the United States, with 
the product or manufactures of their own or any- 
other country, as respects both tonnage and duties 
on merchandise. Reciprocal commercial inter- 
course has been maintained with these states for 
some time. With Brazil and Chili since 1828, with 
Ecuador since 1839, with United States of 
Colombia since 1848, with Paraguay since 1850, 
with Argentine Confederation since 1853, with 
Bolivia since 1858, and with Peru since 1870. 
Recently, special privileges have been granted a 
number of the South American republics, who, in 
turn have reciprocated by admitting some of the 
products of the United States at a low duty. 

Hawaiian Reciprocity Treaty — The treaty be- 
tween the United States and the Hawaiian Islands, 
signed January 13, 1875, establishes absolute free 
trade between these two countries. The preamble 
to this treaty begins as follows: 

" The United States of America and his Majesty 
the King of the Hawaiian Islands, equally animated 
by the desire to strengthen and perpetuate the 
friendly relations which have heretofore uniformly 
existed between them, and to consolidate their 



FEDERAL FINANCES. I 23 

commercial intercourse, have resolved to enter into 
a convention for commercial reciprocity." 

Article I. of this treaty is to the effect that the 
United States agrees to admit all the articles 
named in the following schedule, the same being 
the growth and manufacture or produce of the 
Hawaiian Islands, into all the ports of the United 
States free of duty. 

Schedule: Arrowroot, castor oil, bananas, nuts, 
vegetables, dried and undried, preserved and un- 
preserved; hides and skins, undressed; rice, pulu, 
seeds, plants, shrubs or trees, muscovado, brown 
and all other unrefined sugar, meaning hereby the 
grades of sugar heretofore commonly imported 
from the Hawaiian Islands and now know in the 
markets of San Francisco and Portland as " Sand- 
wich Island sugar;" syrup of sugar cane, melada, 
and molaoses; tallow. 

Article II. is to the effect that his Majesty, the 
King of the Hawaiian Islands, agrees to admit all 
the articles named in the following schedule, the 
same being the growth, manufacture, or produce of 
the United States of America, into all the ports of 
the Hawaiian Islands free of duty. 

Schedule: Agricultural implements, animals, 
beef, bacon, pork, boots and shoes, grain, flour, 



124 FEDERAL FINANCES. 

meal and bran, bread and breadstufifs of all kinds; 
cotton and manufactures of cotton, bleached and 
unbleached, and whether or not colored, stained, 
painted or printed; hardware, hides, furs, skins and 
pelts, dressed or undressed; hoop iron and rivets, 
nails, spikes and bolts, tacks, brads or sprigs, ice, 
iron and steel, and manufactures thereof; leather, 
lumber^ and timber of all kinds, round, hewed, 
sawed and unmanufactured, in whole or in part, 
doors, sashes and bhnds; machinery of all kinds, 
engines and parts thereof; oats and hay; paper, 
stationery and books; petroleum and all oils for 
lubricating and illuminating purposes; wool and 
manufactures of wool, and textile manufactures 
made of combination of wool, cotton, silk or linen. 
(These are only the principal articles mentioned in 
the schedule, minor articles have not been named.) 
It was agreed that no export duties or charges 
should be imposed in the Hawaiian Island, or in 
the United States, upon any of the articles pro- 
posed to be admitted into the ports of the Hawaiian 
Islands or the ports of the United States free of 
duty. His Hawaiian Majesty further agreed that, 
so long as the treaty remained in force, he would 
not lease or otherwise dispose of, or create any lien 
upon, any port, harbor or other territory in his 



FEDERAL FINANCES. I 25 

dominion, or grant any special privilege or rights 
of use therein, to any other power, state or govern- 
ment, nor make any treaty by which any other 
nation could obtain the same privileges, relative to 
the admission of any articles free of duty, which 
had been secured to the United States. 

The new Reciprocity Act will go into effect Jan- 
uary I, 1892. By referring to the law it will be 
seen that if any country, exporting sugar, molasses, 
coffee, tea and hides to this country, which are now 
admitted free of duty, shall impose after January i, 
1892, any duties on the agricultural or other 
products of the United States, then the President 
of the United States is empowered to suspend, by 
proclamation, the free introduction of sugar, mo- 
lasses, coffee, tea and hides, the production of such 
country. 

As a result of this legislation, several reciprocity 
treaties have been made with some of the South 
American republics. Notably among these is the 
treaty with Brazil. Under the provisions of this 
treaty, Brazil reduces her import charges upon 
American products and the government of the 
United States admits, free of duty, sugar, coffee, 
tea and hides, the products of Brazil. 



CHAPTER XL 

AVOIDING DUTIES. 

As pointed out in a previous chapter, the old 
piratical method of smuggling has died out, and in 
its place has come what may be called a sharp- 
practice method of avoiding duties. Some of these 
schemes for defrauding the government are planned 
in such a smooth manner, that even if the principals 
engaged in the undertaking are caught they will 
escape punishment, for the reason that they manage 
to keep within the bounds of law in their attempt 
to evade payment of duties. 

One of the popular methods resorted to in cheat- 
ing the government of its just dues, is the practice 
adopted by foreign manufacturers of sending mer- 
chandise to this country on consignment. To do 
this the foreign house must have a branch estab- 
lishment in this country to act as an accomplice in 
playing the game. The foreign house then ships a 
quantity of goods to the house in this country. 
Th'e invoice accompanying the merchandise indi- 
dates a price far below the real value of the goods. 
The proprietor of the establishment on this side of 



FEDERAL FINANCES. 127 

the ocean understands his business, and he imme- 
diately marks them up to their correct value before 
he sells them to the jobbing houses in this country. 
The practice of sending consignments, which are 
purposely undervalued, to agents in this country is 
especially true in reference to importations of silk. 
The appraiser in assessing the duties on merchan- 
dise must confine himself to the foreign price. The 
law on this point is that the appraiser must assess 
the duties on the actual market value of the mer- 
chandise, at the time of exportation, in the country 
from which it was imported into the United States. 
Here is where the difficulty Hes in appraising the 
value of silks. It is hard for the appraiser to say 
just what the cost of labor and material was in 
making a piece of silk, for the reason that silks are 
of every conceivable grade. He must, then, take 
the importer's word for it as it appears in the sworn 
invoice. As heretofore explained, when an ex- 
porting merchant in a foreign country wishes to 
ship goods to this country, he must go before a 
United States consul and make oath to the amount 
and cost of goods he proposes to ship. The invoice 
must be approved by the consul. It would seem 
that this would be a check upon undervaluations, 
but it is not, as respects some articles. The consul 



128 FEDERAL FINANCES. 

can have no idea of the foreign value of all kinds of 
silk, and he, too, must take the foreign merchant's 
word for it. 

The essential feature of the consignment system 
is the concealment of the actual foreign market 
value, so that the appraiser can have no standard 
by which to assess values. American importing 
firms of good standing and credit cannot purchase 
silks in Lyons or Zurich and import them to this 
country and make a profit. As a rule, all imported 
silk goods come consigned to commission mer- 
chants in this country, and wholesale dealers are 
compelled to buy from them. This practice has 
existed for a long time, and merchants who deal in 
silks are fully aware that consigned silks are fraud- 
ulently imported into this country. But wholesale 
dealers in dry goods must supply their customers 
with silks, and, as they cannot purchase these goods 
in foreign markets without being losers, they are 
compelled to buy them of the commission mer- 
chants. 

The extent to which a shipment of silks can be 
undervalued, depends entirely upon the ability and 
shrewdness of the agent on this side of the Atlantic. 
The only penalty for undervaluing a shipment of 
goods, is to have the duty advanced twenty per 



FEDERAL FINANCES. I2Q 

cent. The agent usually experiments on a small 
shipment first. If he succeeds in getting them 
through the custom house at a low figure he then 
orders a large consignment. If this should be rated 
some higher, he calls attention to the fact that the 
same goods were assessed at a lower price on a 
former shipment. This argument usually proves 
effective, and the agent is successful. 

The " dummy-package" fraud has been and still 
is a favorite method of avoiding duties. In order 
to work this method the importer must be in col- 
lusion with some inspector. A bogus or false 
package is sent to the appraiser for examination. 
This dummy-package will contain articles upon 
which there is a low duty, and the package is rep- 
resented as a fair sample of all the packages in the 
cargo. The other packages are in appearance the 
same as the one sent to the appraiser's office, but 
contain goods upon which there is a much higher 
duty. This method of securing a low assessment 
of duties was extensively practiced in Chicago sev- 
eral years ago. 

A number of retail dealers in Eastern cities do a 
snug little business in what is known as the " sam- 
ple package " method of evading duties. The law 
allows certain small packages, such as pieces of 



I^O FEDERAL FINANCES. 

cloth, single gloves, shoes or stockings, for sample 
purposes to be imported free of duty. The con- 
federate in Europe will ship a box of odd shoes or 
gloves to his customer in this country as " sam- 
ples " of what he has to sell in that Hne. These^ 
of course, come through duty free. When next 
the dealer in Europe has occasion to send more 
samples to his accomplice in this country, and this 
occasion happens frequently, he sends the mates 
to the odd shoes and gloves he sent in the first 
consignment. As the odd articles in one package 
are numbered to correspond with the articles in 
the other package it does not take much trouble to 
arrange the pairs properly. When this is done the 
tricky dealer has quite an assortment of shoes and 
gloves upon which he has paid no duty. 

Pro-forma invoices have long been a means by 
which dishonest importers have cheated the gov- 
ernment. It sometimes happens that shipments of 
goods are made from points that are remote from 
consular offices, and for this reason it is almost im- 
possible to procure a certified invoice. Under these 
circumstances the importer is allowed to enter his 
goods on what is termed d, pro-forma invoice. An 
invoice of this kind is merely a statement by the 
importer of the amount of goods in a given ship- 



^ FEDERAL FINANCES. 1 3 I 

ment and an estimate of the prices of the different 
articles. One peculiarity about 2i pro- for ma invoice 
is that when the importer undervalues his merchan- 
dise and the appraiser advances it ten or twenty 
per cent, the importer is not subject to any penalty. 
If an importer brings goods into this country on an 
invoice which he has sworn to before a consul, and 
the appraiser should assess the value of the goods 
at a higher price than that named in the invoice, it 
would subject the importer to a fine. The dis- 
honest importer, therefore, always imports mer- 
chandise on di pro-forma invoice whenever he can 
possibly do so, as it enables him to undervalue his 
merchandise without running the risk of having to 
pay any penalties. 

Although the law making an allowance for dam- 
aged goods has heen abolished, it may be well to 
mention the frauds committed under " allowances 
for damages," merely as an example of the exten- 
sive frauds committed on the custom duties. In 
order to understand how these frauds were operated 
it is necessary to make one or two explanations. 
There is at every important port of entry a class of 
lawyers known as custom brokers. There is a good 
deal of work in making out invoices and manifests 
and having them properly indorsed by the different 



132 FEDERAL FINANCES. 

heads of departments. The work is much like pre- 
paring the papers to present a case in court, and 
nearly all the importers and shippers find it con- 
venient to employ these brokers. In fact, these 
brokers may be said to be attorneys who practice 
before the collector of customs at a port of entry. 

The law, until recently, provided that should a 
cargo of merchandise become damaged in a voyage 
from a foreign port to this country, that the ap- 
praiser in assessing the value of the goods should 
make allowances for such damage. This afforded 
an opportunity to cheat the government that was 
hard for the unscrupulous importer to resist. All 
he had to do was to secure an allowance for dam- 
ages larger than he had really sustained and he was 
sure to be a winner, without running a risk of being 
subject to any penalties. 

The practice of securing an over allowance for 
goods damaged while in voyage, became so general 
that a certain class of custom brokers found it 
profitable to push damage claims. The practice 
became so profitable that there actually grew up a 
class of brokers called " damage brokers," who 
advertised and held out that they were able to 
secure large allowances for damaged goods. The 
importer came to know that the damage brokers 



FEDERAL FINANCES. 133 

were very successful in putting through this class 
of claims, and he employed them freely. The suc- 
cessful damage broker had a great influence over 
the appraisers, and it is generally conceded that 
much crooked work was done. The matter was 
carried to such an extent that damages were some- 
times allowed when none had been sustained. This 
could only be done where there existed a corrupt 
ring consisting of a damage broker, an inspector 
and an appraiser. Their method of procedure was 
like this: Supposing that a dishonest importer 
receives a consignment of almonds and Brazil nuts; 
he makes an application for a rebate on the duty 
upon the ground that the nuts have been damaged 
at sea, and puts the case in the hands of an expert 
broker. A box of damaged nuts is provided for 
the occasion and sent to the appraiser at the public 
store with the statement that the package is a 
sample case of the cargo. The appraiser, who has 
previously been " fixed," will perhaps report that 
the nuts are damaged to the extent of one-tenth of 
the whole lot. The importer then will only have to 
pay a duty on nine-tenths of his cargo, as the law 
did not, until recently, require duties to be paid on 
damaged goods. 

By a recent act of Congress, allowances for dam- 



134 FEDERAL FINANCES. 

aged merchandise is no longer granted. The im- 
porter who now receives a cargo of damaged 
goods must abandon that part of it to the 
government on which he does not want to pay a 
duty. The government then sells the damaged 
goods at auction and applies the proceeds to the 
payment of the duties. This law was passed for 
the purpose of putting a stop to the wholesale 
frauds that were being committed by the damage 
brokers. How well the new law will work remains 
to be seen. If the damage brokers do not find a 
way to beat it and continue to defraud the govern- 
ment, it will be strange. The history of the collec- 
tion of the customs duties has been that no sooner 
is one method of avoiding the tax discovered and 
exposed than another arises to take its place. 



CHAPTER XII. 

SMUGGLING. 

Smuggling, as everybody knows, is to bring 
dutiable goods into a country in a secret and clan- 
destine manner, or in a bold and robber-like fashion 
to force an entrance, defying authority. Avoiding 
duties is when goods are entered under some color 
of right, but smuggling is an attempt to run the 
gauntlet of custom officers without any excuse, and 
facing all risks. As pointed out in a previous 
chapter, the old piratical and bold method of smug- 
gling has almost passed away, and in its place have 
come quiet and sly ways of smuggling, a few of 
which will be described here. 

To begin with, there is the old and reasonably 
safe method of secreting small and valuable articles 
on the person, so common with a certain class of 
passengers arriving from foreign countries. Large 
importations have been made in this way of such 
articles as glass eyes, upon which there is a heavy 
duty, jewelry of all kinds, opium, valuable laces, 
silk and silk ribbons. The inside lining of clothing, 
in which these articles are concealed, is seldom 
13s 



136 FEDERAL FINANCES. 

examined by the inspectors. The baggage of a 
passenger who has just arrived by steamer from 
Europe is generally pretty well examined, but, from 
the great difficulty attending a personal search, it 
is never made except upon suspicion. 

As said before, personal smuggling is generally 
safe for the reason that personal examination is 
seldom made. Not one woman in a thousand who 
sews a few yards of lace into her skirts is ever 
caught. It is only those who make a business of 
this species of smuggHng that get into difficulty. 
The female smuggler who makes frequent trips to 
a foreign country is sooner or later suspicioned by 
the inspectors, and she is closely watched. If any- 
thing occurs to confirm them in the opinion that 
she is engaged in smuggHng, she is arrested and 
taken to the custom house, where there is an apart- 
ment for searching women, and handed over to the 
inspectress in charge, who seldom fails to make a 
merciless examination. 

It used to be, several years ago, that great efforts 
and much pains were taken by some people to 
smuggle in an extra garment or two on their return 
trip from London or Paris, where they were enabled 
to purchase clothing very cheap. But it is no 
longer necessary to go to the trouble of smuggHng 



FEDERAL FINANCES. I 37 

in order to bring clothing into this country free of 
duty. All that is necessary to do now on a return 
trip from Europe is to swear that all the clothing 
you have in your possession is your own personal 
wearing apparel, and you can bring through, duty 
free, two or three trunks full of clothing if you wish. 

This wholesale entrance of wearing apparel with- 
out being subject to duty is rendered possible by a 
decision of the United States Supreme Court, 
April 7, 1884. It appears that Wm. Waldorf Astor 
had arrived from Europe, bringing with him a large 
assortment of clothing which he had purchased 
while abroad. It had been seized by custom offi- 
cials at New York, and held for payment of duties, 
which Astor refused to pay, claiming that he had a 
right to bring with him all clothing that he had pur- 
chased for his own use while abroad. Astor went 
to law about the matter, but was beaten in the 
lower courts. He appealed to the Supreme Court, 
which rendered the following decision: 

" Wearing apparel owned by the passenger and 
in a condition to be worn at once without further 
manufacture; brought with him as a passenger and 
intended for the use or wear of himself or his family 
who accompanied him as passengers, and not for 
sale, or purchase, or imported for other persons, or 



1^8 FEDERAL FINANCES. 

to be given away; suitable for the season of the 
year which is immediately approaching at the time 
of arrival; not exceeding in quantity, or quality, or 
value, that the passenger was in the habit of ordi- 
narily providing for himself and his family at that 
time, and keeping on hand for his and their reason- 
able wants in view of their means and habits of life, 
even though such articles had not been actually 
worn." 

This decision was based on the provision of the 
free list, which admits free of duty all " wearing 
apparel in actual use, and other personal effects." 
It will be seen that the Supreme Court gave a very 
liberal construction to the words " in actual use," 
interpreting them to mean " intended for use or 
wear." This remarkable decision opened the flood 
gates for the free entrance of wearing apparel. 
Since then there has hardly been any limit to the 
amount of wearing apparel that a wealthy individual 
may bring with him on a return trip from Europe. 

.The traveling people living in Eastern cities are 
especially familiar with the privileges that tourists 
may enjoy, and they make the most of it. A trip 
across the ocean in a modern passenger steamer is 
nothing to those who are accustomed to it, and 
there are many well-to-do women in the Eastern 



FEDERAL FINANCES. 1 39 

cities who wish to dress well, and at the same time 
use economy, who frequently combine business 
with pleasure, and go shopping in London or Paris. 

Another method of avoiding duties on personal 
effects, is to bribe the inspectors. The passenger 
pretends to be in a great hurry and requests the in- 
spector to hasten the examination of his baggage. 
The inspector receives a tip, and is assured that the 
favor will be appreciated. The trick is a dangerous 
one to try, as their is a law against offering money 
to inspectors. Those who are in a position to 
know, however, assure us that the game is often 
played. 

Last year Special Agent Wilbur brought to light 
an extensive and organized system of smuggling in 
clothing. The method of operation is as follows: 1 
Certain agents in Boston, New York and other sea- 
board cities take orders for clothing to be made in 
London. The garments are to be made at a very 
reasonable figure, with a small sum added for 
" freightage." This is supposed to be the amount 
of the custom duties. With this extra sum added 
the clothing is very cheap compared with American 
prices, and their are many who like to have their 
tailoring done in London anyhow, so the agent 
finds no difficulty in taking a number of orders. In 



I^O FEDERAL FINANCES. 

due time the clothing is made up and sent over to 
this country in the care of an accomplice, who 
is an employe on one of the ocean steamers. 
Arriving in this country, the packages are kept well 
out of sight for scvaral days after the vessel lands, 
and then slipped ashore in bundles of washing, or 
placed in a sling and lowered from the side of the 
vessel to an accomplice waiting in a boat below. 
In this way the clothing reaches the agent in this 
country, and finally the buyer, who rejoices in the 
bargain he has made, but knows nothing of the 
smuggling process by which it has been done. 

Cigar smuggling has long been a common and 
profitable practice. It is seldom that a vessel 
arriving from Cuba comes into port without a 
quantity of cigars on board intended to be smug- 
gled ashore. The method of procedure in this 
instance is to sew the cigars up in rubber bags and 
throw them overboard after nightfall. The con- 
federates, who are watching, when informed by a 
signal that the cigars are afloat, row out and pick 
them up. 

The high duty on wines and liquors make them 
a profitable article to smuggle into this country, 
especially as the internal revenue tax can usually be 
avoided by the same means. Last year a large 



FEDERAL FINANCES. I4I 

smuggling scheme of this kind was discovered in 
the port of Philadelphia. The German steamer 
Energie was lying at Point Breeze, loaded with oil 
for Bremen. The night before the vessel was to 
leave was a dark and stormy one, and as the night 
inspector, William Lamond, passed along, he noticed 
by the flashes of lightning that men were rushing 
back and forth on board the Energie, bringing large 
boxes on deck and lowering them to small boats 
lying along the steamship's side. The inspector 
slipped off his shoes and crept along the wharf. 
He then climbed on the vessel and hid himself to 
see further developments. Having become satis- 
fied that the men were engaged in smuggling, 
Lamond rushed forward with a revolver in hand, 
and succeeded in capturing one of the men. The 
rest of the smugglers scampered awa}' and hid on 
the vessel and could not be found. Lamond called 
the mounted police to his aid and seized the forty 
cases of champagne taken from the Energie. Sub- 
sequent developments showed that extensive smug- 
gling in liquors had been going on for some time 
from the vessels lying in the Schuylkill river. 

Opium smuggling is so extensive and general 
that it is hardly necessary to speak about it. You 
can hardly pick up a newspaper without seeing an 



1^2 FEDERAL FINANCES. 

account of some new episode in the opium smug- 
gling business. T^he enormous duty of twelve dol- 
lars per pound makes it a great temptation to 
smuggle this article. A very large opium smuggling 
incident occurred recently at San Francisco. A 
cargo of 100,000 pounds of opium was brought 
from China on the yacht Halcyon. The opium was 
transferred from the yacht to a small steamer, which 
in turn loaded the drug on a lumber schooner in 
Puget Sound. The transaction was successful, and 
netted the operators a profit of $1,200,000. Those 
qualified to know say that nearly all the opium used 
in this country is smuggled in. Very little opium 
is brought here in the legitimate way, through a 
custom house. Opium smuggling is confined almost 
exclusively to the Pacific coast and to the Northern 
frontier, where the subject will be again mentioned. 
In this chapter only a few of the articles most 
generally smuggled into this country have been 
mentioned. There are other features of this species 
of illicit trafBc, peculiar to certain sections of the 
country, that can be better described in other parts 
of this book. 



CHAPTER XIII. 

THE ATLANTIC AND GULF COAST. 

The Revised Statutes of the United States de- 
clare that there shall be in the .State of Maine 
fourteen collection districts. Beginning on the 
coast the first district is described as, " The district 
of Passamaquoddy; in which Eastport shall be a 
port of entry and delivery, and the towns of Calais, 
Pembroke and Robinson ports of delivery." A 
little farther down is the district of Machias, and then 
comes" the district of Frenchman's Bay; in which 
Ellsworth shall be the port of entry, and Union 
River the port of dehvery." And so on down the 
coast of Maine and all along the Atlantic shore and 
around the Gulf to Galveston, and on around the 
whole frontier of the United States, the statutes 
name and locate each collection district and port of 
entry. The Atlantic coast is indented by many 
bays and inlets which afford many excellent har- 
bors. This is particularly so on the New England 
coast, and Congress has by various acts located the 
ports of entry and delivery on this part of the At- 



144 FEDERAL FINANCES. 

lantic, minutely describing the bays, inlets, rivers 
and harbors that shall belong to each district. 

Along the Atlantic and Gulf shore the coast is 
protected by the revenue cutters which cruise up 
and down the coast within fifteen leagues of the 
shore. PVom Calais, in Maine, to Key West, Flo- 
rida, the coast is further guarded by inspectors, 
who may be called the policemen of the shore. 
These inspectors belong to the life-saving stations, 
but it is part of their duty to look after stray or sus- 
picious looking vessels, and report them to the 
nearest custom officer, and also to keep a sharp 
lookout for small sailing vessels or row boats that 
put into shore in out-of-the-way nooks and corners. 
The shore inspector must meet such vessels, if pos- 
sible, and ascertain whether they are engaged in any 
smuggling schemes 

A policeman walks a distance of six miles along 
the sea-shore, and then he meets another police- 
man. The guards then exchange checks or brass 
tickets, and, turning around, start back again on 
their respective beats. This system of exchanging 
numbered tickets is so arranged that it shows 
whether or not a policeman has attended to his 
duty. As he meets a fellow policeman at both 
ends of his six-mile journey, he must necessarily 



J 



FEDERAL FINANCES. 1 45 

travel the distance or he could not exchange his 
tickets properly. When there is an inlet or river 
that the officer cannot cross, he deposits a check 
in an iron box, that is fasted to a post, and takes 
out one of a different number to return to the 
policeman at the other end of his route. These 
boxes are occasionally replenished with checks by 
an officer who oversees a division. 

It would be a tiresome repetition to attempt to 
name all the custom districts along the Atlantic 
coast. Suffice it to say that there are many ports 
of entry, and that ports of delivery are almost 
innumerable. The revenue flag, with its eagle and 
cross-bars, floats above a little custom house in 
every sea-port town. 

It is through the ports of the Atlantic coast that 
most of the imported merchandise from Europe 
reaches this country. The amounts of customs 
duties received from the chief ports on the Atlantic 
coast for the fiscal year ending June 30, 1890, are 
as follows: 

District. Tonnage. Customs Duties. 

New York $214,323.86 $153,900,052.00 

Philadelphia 58,161.21 24,284,774.11 

Boston 42,994.95 19,262,178.82 

Baltimore 35j433-27 2,865,010.76 

Key West... 707.85 752,209.20 



1^6 FEDERAL FINANCES. 

District. Tonnage. Customs Duties. 

Providence 372-27 266,896.81 

Hartford 234,709.90 

Portland 5,595-o6 139,822.36 

Bangor 389.16 116,608.09 

New Bedford 245.49 109,850.31 

Plymouth 105.24 108,082.85 

As the leading port of the Atlantic coast, New- 
York is entitled to special mention. It will be seen 
from the table given above that the imports at New 
York are larger than all the others combined. In 
fact the duties collected at the port of New York 
are more than three-fifths of all the customs duties 
collected in the United States. To collect this vast 
amount it requires the service of more than nine- 
teen hundred custom officers at an annual compen- 
sation of nearly three million dollars. 

Everything about the harbor and port of New 
York is on a colossal scale. Standing on the Brook- 
lyn Bridge and looking up either the North or East 
River, the scene presented is an endless continua- 
tion of shipping. The custom house is an immense 
structure, built of granite and marble. The various 
departments of the customs service have offices in 
this building. The rotunda is used as a sort of 
clearing house or general exchange for customs 
purposes. All the various departments are repre- 



FEDERAL FINANCES. \^^ 

sented here. The collector, surveyor, naval offi- 
cer, storekeeper, chief appraiser, in fact all the 
various heads of departments are represented here 
by one or more clerks. The desks in the rotunda 
are arranged in circular form, and about fifty or 
sixty clerks are on duty every day. This method 
of having a common center for all the departments 
is a peculiarity that belongs entirely to the New 
York custom house, no other port employs this 
method. 

The feature of New York harbor that stands out 
in importance above everything else is Castle 
Garden. The site now occupied by this famous 
immigrant depot was originally a little island in 
the bay, about three hundred yards from the shore. 
The old Dutch rulers of New York built a fort on 
this spot more than two hundred years ago. Dur- 
ing the war of 1812 the government replaced this 
fort with a new one built of stone. The new fort 
was called Fort Clinton, and was considered a mar- 
velously fine structure for those days. A few years 
later a new fort was built farther down the bay. 
Fort Clinton was dismantled, and was not used 
again until 1824. At that time Lafayette made his 
second visit to the United States, and the interior 



148 FEDERAL FINANCES. 

of the old fort was turned into a ball-room for the 
purpose of celebrating the occasion. 

In 1839 the fort was leased to Richard French, 
who remodeled the old structure and turned it into 
a beer garden. The interior was remodeled and 
changed into a theater, where cheap entertainments 
were given. A park surrounded the old fort, on 
which a number of thrifty trees had long flourished. 
French fixed the park up, laid out walks, along 
which seats were placed, hung lanterns in the 
trees, and called the place " Castle Garden." Cool 
breezes from the bay, popular music and cheap beer 
soon made Castle Garden famous. The place became 
so popular that it was found to pay better to cater to 
the desires of the more fashionable New Yorkers. 
The cheap concerts gave way to a higher class of 
entertainments, and gradually the vulgar element 
was driven from the garden, and the place became 
a fashionable resort. 

It was not until 1855 that Castle Garden was used 
as a place for landing immigrants. Before this time 
immigrants were landed at the various ship wharves 
which lined the North River. When the immi- 
grants landed at these wharves they were subject 
to all manner of frauds and extortions. Even be- 
fore leaving the ships they would be greeted by 



\ 



FEDERAL FINANCES. 1 49 

those who could speak their own language, and 
who, under the cloak of nationality and the guise 
of friendship, were only scheming to ensnare them 
in some plot for the purpose of robbing them. 
Runners for vile hotels, who charged them exhor- 
bitant prices, persons claiming to be railroad agents, 
with bogus tickets for sale, and thieves and villains 
of every description infested the old landings. It 
was with the hope of cleaning these vermin out and 
protecting the poor immigrant that the Board of 
Immigration was organized in 1847. They strug- 
gled with the matter for eight years, but were unable 
to accomplish much. 

The evils continued to grow, and it became nec- 
essary to take some steps toward a better protection 
of the new-comers. It was decided to have the 
immigrants landed at one place. By centralizing 
them in this way, it was thought that they could be 
handled better, and so it proved. Castle Garden 
was chosen as the new depot for immigrants, owing 
to its central and pleasant location, and the board 
commenced business at the new stand, May 5, 1855. 

Under the regulations provided at this new 
depot, the interests of the immigrants have been 
carefully guarded ever since. Castle Garden was 
used as an immigrant station for thirty-five years, 



I CO FEDERAL FINANCES. 

when the lease of the Board of Immigration expired. 
The government then took hold of the matter and 
transferred the landing of the immigrants to the 
Barge Office, which place was used as an immigrant 
station for about a year. 

In 1866 Congress passed a bill providing for the 
erection of a Barge Office at the Battery. The law 
directed that cabin passengers and their baggage 
should be transferred from quarantine to the Barge 
Office, and be examined there. This passenger 
depot was built at a cost to the government of about 
$400,000, and was opened up for customs pur- 
poses, as respects cabin passengers and their bag- 
gage, on January i, 1883, 

For a number of years the collectors at New York 
had complained that it was difficult to properly col- 
lect the duties on passenger's baggage, owing to 
the number of different and widely scattered 
wharves. It was for the purpose of remedying this 
evil that the government established the Barge 
Office, and employed three large ferry boats to 
transfer cabin passengers from the ships at quar- 
antine to the Barge depot. Much criticism was 
passed on the government for incurring this expense, 
and after it had been in operation two years the 
government ceased to transfer passengers, and for 



FEDERAL FINANCES. I c j 

the next five years only such steamship companies 
landed their passengers at the Barge Office as 
found it profitable or convenient to do so. 

As stated before, the lease of the Board of Immi- 
gration on Castle Garden expired in 1890, and the 
government took hold of immigration matters at 
New York. Congress passed a bill authorizing the 
construction of an immigrant building on Ellis 
Island, a small island in the harbor, near the statue 
of liberty. While this building was in process of 
structure, the government used the Barge Office as 
an immigration station. The building on Ellis 
Island has just been completed, and the immigrants 
are now landed there. The place is called " New 
Castle Garden," and is the finest immigrant depot 
in this or any other country. No port in the world 
has such perfect regulations for the protection of 
the poor traveler seeking a home in a strange land. 

The principal amount of customs duties collected 
on the Atlantic coast comes from the Northern 
ports, as will be seen by referring to the table 
given at the beginning of this chapter. The reason 
for this is that there are but few good harbors along 
the Southern coast. Many of the harbors along 
the Southern coast are not deep enough to admit 
the entrance of large ocean steamers. Charleston 



152 FEDERAL FINANCES. 

is SO situated that it would be a great port of entry 
if its harbor were not so shallow. An appropria- 
tion has been made by the government for the 
purpose of deepening this harbor, and when the 
improvement is made Charleston will become one 
of the greatest ports on the Atlantic coast. 

Key West, Fla., is an important Southern port, 
and there is a special reason for its being so. 
Several causes have contributed to the building up 
at this place of a large tobacco manufacturing in- 
dustry. It is supposed that manufacturing cigars 
as far south as possible improves their quality. 
Havana tobacco makes the best cigars, but manu- 
factured cigars must pay a heavy duty. Imported 
leaf tobacco is not subject to as high duty as when 
manufactured, and it is because of this that great 
quantities of leaf tobacco are imported from Cuba 
into Key West, and there made up into cigars. 
Key West cigars are regarded as being equal to 
pure Havana cigars, from the fact that they are 
made from Cuban tobacco in the moist climate of 
the south. 

The* amount of tonnage and customs duties re- 
ceived for the year 1890 at each of the important 
ports on the Gulf coast is as follows: 



FEDERAL FINANCES. I^^ 

District, Tonnage. Customs Duties. 

New Orleans $52,696.29 $2,634,731.68 

Tampa 258,921.25 

Galveston 8,793.61 116,312.68 

Corpus Christi 16,669.69 

Pensacola 21,851.54 7,072.66 

Mobile 6,440.13 5,010.74 

Appalachicola i:557- 12 673.80 

The tonnage duties at Pensacola and Appalachicola 
are much greater than the custom duties. The 
reason for this is that the ships registered at these 
ports are mostly engaged in the coast trade. A 
great deal of fine wood and lumber is shipped from 
these ports to the Northern cities on the Atlantic 
coast. 

New Orleans is the great port of the South. The 
largest ships can enter the harbor here, and they 
come from all parts of the world. The chief articles 
of import are sugar, coffee and fruit. New Orleans 
has the largest and finest custom house in the world. 
The building was begun in 1848, and it was thirty 
years before it was finished. The outside is con- 
structed of Quincy granite, and the interior is lined 
with fine marble. This structure was built at a cost 
of $4,900,000.00 

Galveston, in Texas, will be in a few years an 
important port of entry. At the last session of 
Congress (1890) a large appropriation was made for 
the imprgyement of this harbor. 



CHAPTER XIV. 

MEXICAN FRONTIER AND PACIFIC COAST. 

There is a peculiarity about the Mexican fron- 
tier that is entirely is own. It consists in what is 
known as the " Free Zone," and is situated in old 
Mexico. Several years ago the Mexican govern- 
ment passed a law setting apart a narrow strip 
of territory on the boundary line between that 
country and the United States to be a " Zona 
Libra," or free zone, into which goods and mer- 
chandise could be shipped from any part of the 
world, dutyfree. The object of this legislation was 
to build up a narrow strip of Mexican territory at 
the expense of the United States frontier. This 
piece of strategy by the Mexican government is 
accomplishing its purpose, because the United 
States is debarred from retaUating with a similar 
law for the reason that it would be contrary to the 
provision of the Constitution, which declares that 
*' all duties, imposts and excises shall be uniform 
throughout the United States." 

The free zone is a strip of territory twenty miles 



FEDERAL prNANCES. \^^ 

wide on the Mexican side of the line, and extends 
from Matamoros to Tijuana. 

The United States frontier adjoining old Mexico 
is poorly guarded. There is a custom house 
at Brownville, Laredo, Eagle Pass and El Paso, 
Texas, and at Nogales, Nevada. Mounted in- 
spectors patrol this part of the frontier, but they 
only act as detectives, and there are not enough of 
them to properly guard the boundary line between 
this country and the " Free Zone " in Mexico. It 
is doubtful if any ordinary number of men could 
guard the Mexican frontier. The barren plains in 
the Northern part of Texas, and in the Southern 
part of New Mexico and Arizona, afford great pro- 
tection to the smugglers. Usually, natural impedi- 
ments make smuggHng unprofitable. But it is the 
reverse in this instance. To the professional smug- 
gler, this sterile and wild tract of country is a bridge 
between Mexico and the inhabited part of the 
United States, which, if he can but safely cross, he 
feels that he is secure from pursuit and capture. 

Running horses from Mexico into the United 
States is the chief industry of the Mexican smug- 
glers in this part of the country. Owing to the 
high duty on horses the business is quite profitable. 
As stated before, the Mexican frontier is poorly 



156 FEDERAL FINANCES. 

guarded. From Eagle Pass to El Paso, a distance 
of four hundred miles, there are but four mounted 
inspectors. Instead of these inspectors watching 
the smugglers it is much nearer to the truth to say 
that the smugglers watch the inspectors. By a 
decoy movement they will attract the attention of a 
guard to the extreme end of his route, while in 
another direction they rush a drove of horses over 
the line before the guard knows what has happened. 
The smugglers go prepared for these trips" across 
the plains. They carry with them a good supply 
of water and provisions, and they go armed to the 
teeth. Their journey is usually through the desert 
part of the country, and they know the trails better 
than the government officers. To follow them is 
almost as futile as for a handful of soldiers to pur- 
sue a band of Sioux Indians into the Bad Lands. 
The only way in which these land pirates can be 
captured is to let them have their own way about 
crossing the plainsand then to watch for them when 
they come out on the other side. It sometimes 
happens when a band of these smugglers are pass- 
ing through Kansas or Arkansas that the inspect- 
ors, with the aid of local officers, succeed in over- 
hauUng therh. 

There is another method of avoiding customs 




A MOUNTED INSPEC'IOR. 



FEDERAL FINANCES. I 57 

duties on cattle and sheep, that is much in vogue 
among the ranchmen who own farms on the frontier. 
A stock-raiser Hving on the boundary line will buy 
or lease a ranch on the Mexican side of the line. 
He then drives a few cattle over to his new pos- 
session. He has a right to do this, because his farm 
in Mexico is in the " free zone," and the Mexican 
government taxes him nothing for bringing his 
cattle into that piece of neutral territory. Our gov- 
ernment permits the cattlemen to bring back their 
own stock, which have only been across the line for 
grazing purposes, and here is where the ranchmen 
defraud the government. Gradually and in a quiet 
way, the ranchman buys a great number of cattle 
in Mexico and turns them in with his American 
flock, which he is pasturing over in the " free zone. " 
The result is that the American colony of cattle on 
the Mexican side increases at a prodigiously rapid 
rate, while the flock on the American farm seldom 
grows any smaller, although the ranchman sells a 
great many cattle therefrom. The scheme works 
splendidly, for by driving the cattle back and forth 
from one farm to the other, for the purpose of 
branding the young, in search of better pasturage, 
and by other excuses, the ranchman is enabled to 
so mix up the cattle he buys in Mexico with those 



1^8 FEDERAL FINANCES. 

he owns in the United States, that the government 
officials are unable to prove that he has smuggled 
any of them across the line. 

The government has undertaken to prosecute 
these offenders in the courts of law, but in nearly 
every instance the ranchmen have come out ahead. 
Smuggling, and otherwise avoiding tariff duties, is 
so general in this part of the country, that it is 
almost impossible to secure a jury that is not more 
or less in sympathy with the ranchmen. 

The Free Zone is a neutral ground, upon which 
both American and Mexican smugglers meet. 
Merchandise from any part of the world can be 
shipped into the Free Zone without paying a duty. 
Silks can be shipped from Paris and come through 
the United States, and the importer in this favored 
territory will have no duties to pay. The only in- 
convenience he is put to is that his agent in New 
York makes out a sworn statement, which he gives 
to the United States custom officers of that port. 
In this statement he declares that the goods are 
only going through the United States on their way 
to Mexico, and are not for use or sale in the United 
States. This is called shipping goods through " in 
bond." When goods of any kind are once within 
the Free Zone it becomes an easy matter to smug- 



FEDERAL FINANCES. jcq 

gle them back into the United States, thereby- 
avoiding the duty. Thousands of dollars worth of 
light and expensive articles, such as silks and 
opium, annually find their way into the United 
States by way of the Free Zone, without being 
subject to the tariff duty. 

Smuggling is most common along the Rio 
Grande. It often happens in the summer time 
that this river becomes very low, and sometimes it 
goes dry entirely. Then the smugglers reap a har- 
vest. With roads hard as paved streets, with 
moonlight nights, with nothing to prevent but a 
few mounted guards, and these hundreds of miles 
apart, what is to prevent these tariff dodgers from 
conducting a safe and profitable business? 

The fact is that during the dry season when the 
bottom of the Rio Grande is dry and dusty, smug- 
gling becomes an epidemic, and all classes seem to 
be infected with the desire to do a little importing 
of their own in a quiet way. This is especially true 
at El Paso, Texas, which is opposite to the city of 
Paso del Norte, in Mexico. When the river is dry 
and the crossing good, the guard on the bridge at 
this point looks helplessly down on a crowd of pe- 
destrians as busily engaged in carrying small bun- 



l6o FEDERAL FINANCES. 

dies from Mexico to the United States as a swarm 
of ants carrying eggs from one hole to another. 

The United States has, of course, a large legiti- 
mate trade with Mexico, which comes through the 
regular channels of commerce and pays the custom 
house duties. The chief imports from Mexico are 
horses, ponies, mules, cattle, sheep, goats, kids, to- 
bacco, fine woods, hides and skins, dyes, caoutchouc, 
fruits, filagree jewelry, chocolate and aloes. 

To people living in the Middle and Eastern 
States, the Pacific coast is so far away that its com- 
mercial importance is almost lost to sight. Beyond 
the Rocky Mountains a new order of things set in. 
The inhabitants of the Pacific Slope turn their faces 
to the West when they look for the ships that come 
from the East. The States of Washington, Idaho, 
Oregon, Nevada and California, and the Territories 
of Utah and Arizona, receive nearly all their im- 
ported wares by way of the ports on the Pacific 
coast. 

San Francisco is the capital of the Pacific Slope, 
a-nd to this port come ships from the four quarters 
of the globe. From Europe, sailing vessels come 
by way of Cape Horn, and from across the Pacific 
Ocean, vessels of all kinds cqme from China, Aus- 
tralia, and the East Indies. Nearly all the steel and 



FEDERAL FINANCES. l6l 

iron used in the Pacific States come from England 
in sailing vessels; it being cheaper to bring bulky 
articles this long distance by water than it would be to 
transfer them from vessels to cars at New York. 

The port at San Francisco is the great Chinese 
depot of this country, not only on account of the 
products of China, which are entered here, but also 
on account of the number of Chinese immigrants 
that annually come to San Francisco. The new 
law restricting Chinese emigrants from coming to 
this country has not operated in entirely keeping 
the Chinaman from our shores. It is easy to en- 
force the law when the emigrant from China comes 
on a steamer that enters the Golden Gate, but the 
wily Celestial does not enter the United States in 
that way. He lands at Victoria in British Colum- 
bia, or at Enseneda in Mexico, and then enters this 
country by a flank movement. As has been de- 
scribed in previous chapters, the Mexican and 
Canadian frontiers are poorly guarded, and the 
Chinaman has no trouble in crossing the line. 

The Pacific coast is guarded by revenue cutters 
in the same way that the Atlantic coast is, but the 
shore is not patrolled by policemen except in a few 
places. A great deal of smuggling is done in and 



1 62 FEDERAL FINANCES. 

around Puget Sound, and several special watchmen 
are on duty there. 

The following are the tonnage and the import 

duties received at the principal ports on the Pa- 
cific coast for the year ending June 30, 1890: 

District. Tonnage. Customs Duties. 

San Francisco $38,523.16 $8,356,328.15 

Willamette 1,937.16 521,019.00 

Puget Sound 8,014.83 121,773.73 

San Diego 2,780.59 67,655.70 

Astoria 1,570.95 43,440.70 

Wilmington 961.82 35>699.53 

Sitka..... 480.86 6,445,97 



CHAPTER XV. 

THE NORTHERN FRONTIER. 

From Blaine in the northern part of Washington 
to Pembina in North Dakota, a distance of i 200 
miles, there are no custom houses. The Canadian 
Pacific Railroad in British Columbia and the 
Northern Pacific Railroad in the United States run 
parallel to each other for this distance, but there is 
no road connecting them between Blaine and 
Pembina. The mountainous and wild country 
between British Columbia and the United States 
is quite impassable, hence there is no need for 
custom houses along this part of the frontier. At 
Pembina, on the St. Paul and Minnesota Railroad, 
there is a custom house, and also at St. Vincent,' 
_ on the Manhattan road. These are the outlets 
from Manitoba to the United States, and nearly all 
merchandise imported into this country from that 
province is entered either at Pembina or St. 
Vincent. Lumber, seed-wheat, fish, and furs are 
the chief articles imported into the United States 
from Assiniboia and Manitoba. 

Traveling eastward from St. Vincent, we soon 
163 



164 FEDERAL FINANCES. 

enter the dense forests surrounding the Lake of the 
Woods and Rainy Lake River. In these trackless 
forests of northern Minnesota there is no need of 
custom houses. Traveling southward along the 
shore of Lake Superior the first port of entry of any 
importance that we next find is Duluth. Ashland, 
Wisconsin, is also an important port of entry, and 
a great deal of lumber is entered here. The next 
important port is Milwaukee, and then comes 
Chicago, one of the greatest ports in the United 
States. Chicago is to the Northern frontier what 
New York is to the Atlantic seabpard, or New 
Orleans to the Gulf coast. Chicago is the capital 
of the North and West, and its situation at the 
head of the great lakes gives it a commercial 
supremacy which will in time make it the greatest 
port in the United States. It is not necessary to 
enter into a minute description . of the port of 
Chicago. Like the ports of New York or San 
Francisco it is too extensive, and its subdivisions 
and ramifications are too intricate to be described. 
The new public store at Chicago is the finest in the 
United States. During the World's Fair a special 
bonded warehouse will be built at Jackson Park for 
the accommodation of foreign exhibitors. This 
arrangement will permit them to bring goods here 



FEDERAL FINANCES. 165 

from a foreign country and return them after the 
fair is over without being required to pay any 
duties. 

The peninsular of Michigan, surrounded as it is 
by Lake Michigan, Lake Huron and Lake Erie, is 
indented by many harbors, and its shores are thickly 
studded with custom houses. The most important 
port, however, is Detroit, situated on Detroit River, 
at the foot of Lake St. Claire. The chief articles 
imported into the United States from Ontario are 
barley, fish, furs, hides, wood pulp, lumber, gypsum 
and bituminous coal. 

Many smuggling schemes have their headquarters 
at this place. The Detroit River is a narrow chan- 
nel, and the nearness of railroad facilities greatly aid 
the clandestine introduction of merchandise into this 
country. More opium is, perhaps, smuggled into 
the United States by way of Detroit than by way 
of any other point. 

For the purpose of entering opium at San Fran- 
cisco free of duty, a most circuitous route is taken. 
It is .shipped from China to Victoria, B. C, and 
from there to some point in Canada — say Windsor, 
which is directly opposite to Detroit. It is then an 
easy matter, with the aid of confederates in the 
United States, to smuggle the article across the 



I 66 FEDERAL FINANCES. 

river into Detroit, and from there to San Francisco. 
This is a long way around from Victoria to San Fran- 
cisco, but it pays, because the duty is twelve dollars 
per pound on opium, and by this circuitous route 
the importers manage to avoid the heavy duty. 

There are many curious and ingenious ways re- 
sorted to in order to get the opium from Canada 
into Michigan without detection. There was one 
method which the inspectors at Detroit did not dis- 
cover for a long time. It consisted in bringing 
opium across the river in vegetable market wagons. 
On the Canadian side are a number of gardeners 
who market the products of their little farms in 
Detroit. In examining and collecting the duties 
on their truck, it never occurred to the officials to 
look for a box of opium at the bottom of a potato 
sack or under a pile of cabbage. Of course, there 
were but few market gardeners engaged in this 
practice, and nearly all those engaged in dealing in 
the contraband goods were professional smugglers 
disguised as gardeners. 

For a long time a regular system of smuggling 
opium across the Detroit River was kept up right 
under the eyes of the inspectors. At night the 
shore within the city limits of Detroit is patrolled 
by watchmen, but there are only a few of them, 



FEDERAL FINANCES. i^y 

and their beats are necessarily long ones. The 
smuggler on the American side would take up his 
position near one end of a watchman's beat, while 
his confederate on the Canadian side would take 
up a position opposite to him. When the watch- 
man was well out of sight the smuggler on the 
Detroit side would display a light or swing a lan- 
tern as a signal that the coast was clear. A boat 
would then dart out from the opposite shore and 
swiftly shoot across the river. If the smugglers 
did not have time to unload the boat they would 
lay quiet until the watchman returned and again 
started on his round, when they would hastily 
unload. 

In the winter, opium is smuggled across the chan- 
nel by the sled-load. Many Chinese slide into this 
country by the same smooth and quiet way of trav- 
eling. The Chinese are brought to some point 
near the American line along the Detroit or St. 
Clair River and then taken across, at night, in 
sleighs; to some little depot on the American side, 
where they again take up their journey. 

The other principal ports of entry on the lakes 
are Cleveland, in Ohio, and Buffalo and Oswego, 
in New York. The chief imports at these places 
are lumber, barley, furs and fish from Canada. 



J 68 FEDERAL FINANCES. 

The great lakes are guarded by a fleet of revenue 
cutters, but the frontier, between New York, Ver- 
mont, New Hampshire and Maine, in the United 
States, and Canada, in the British possessions, is 
poorly protected. This frontier is not patrolled in 
any manner, and the only custom houses are at the 
railway stations between the United States and 
Canada. The only guards are the iron posts which 
stand like sentinels on the boundary line at a dis- 
tance of half a mile apart. These posts mark the 
line between the United States and Canada as set- 
tled by the survey of 1842. 

Along the New York and Vermont frontier, 
every few miles, can be found what is known as the 
the " line store." These stores are built on the 
boundary line, part of the store being in Canada 
and part in the United States. The chief object of 
these stores is to avoid the payment of the govern- 
ment license required of retail dealers in liquor. 
Another object is to avoid the customs duties on 
such articles as are generally sold in country stores. 
They are closely watched, however, and not much 
is done in the way of evading customs duties. But 
as respects the avoidance of the government license 
tax, the scheme is almost perfection itself. When 
the American customer comes to buv whisk v he 



FEDERAL FINANCES. 1 69 

must go to the Canada side of the store, but when 
a Canadian wants his jug filled he must go over to 
the counter on the American side. On Saturday 
afternoons and rainy days, it is a common sight to 
see two lines of customers going and coming, one 
from Canada and the other from the United States. 

The proprietor escapes paying a tax in the 
United States, for the reason that he does not sell 
liquor to a citizen of this country on American soil, 
and the government cannot prove that the pro- 
prietor sold liquor on the American side to a Cana- 
dian, because the government cannot bring a for- 
eigner into this country as a witness. 

The country along the northern line of New York 
and Vermont is not very thickly settled, and the 
people living there are rather. old fashioned, yet in 
a quiet and prosy way there is a good deal 
of smuggling going on. It is a wonder that 
this part of the frontier is not better guarded. 
There are no police regulations whatever. The 
inspectors at the railway stations go to bed and 
to sleep at night, and the bars between Canada 
and the United States are left down, with no one 
to watch them. That the smugglers living along 
the hne make the most of this opportunity is a mat- 
ter of common notoriety in this part of the coun- 



I^O FEDERAL FINANCES. 

try. Why should smuggling not be an easy matter? 
A look at the picture given here of the hne store 
will satisfy anyone that the natural obstructions are 
not great. The strip of timber back of the store 
belongs to Bridget Johnson, an old widow lady who 
lives four miles north of Mooer's Junction, in New 
York. When the inspector is asleep down at the 
Junction, there is nothing to prevent a set of smug- 
glers from having their own way. All they have to 
do is to open the gates or lay down the fences on 
Mrs. Johnson's farm and bring through anything 
they wish. What is true of this particular locality 
is true all along the line. 

The following table shows the amounts received 
from tonnage and customs duties at the leading 
ports of entry along the northern frontier for the 
year ending June 30, 1890: 

District. Tonnage. Customs Duties. 

Chicago, 111 - $16.23 $5,043,747.44 

Buffalo, N. Y 17.43 817,061.06 

Oswego, N. Y 774-42 558,302.78 

Detroit, Mich 85.74 493,894.03 

Niagara, N. Y 403,747.86 

Champlain, N. Y 2,376.27 383,027.17 

Cleveland, Ohio 276.38 304,921.52 

Milwaukee, Wis 30i>459-39 

Genese, N. Y 129.24 240,661.85 

Ogdensburg, N. Y 132.69 196,305.84 

Huron, Mich 53,905.86 

Cape Vincent, N. Y 45,046.69 

Erie,Pa.. ii,353-35 



CHAPTER XVI. 

THE INTERNAL REVENUE. 

The tax received from the internal revenue is the 
next most prolific source of income to the govern- 
ment. The revenue tax is an excise tax, and is 
levied chiefly on distilled spirits, malt liquors, cigars 
and tobacco. The system under which the internal 
revenue tax is collected is almost perfect, and the 
excise taxes of this country are collected at much 
less expense than are the customs duties. 

The method of collecting the internal revenue is 
entirely separate from the system of collecting the 
customs duties. They are both branches of the 
Treasury Department, but the systems are entirely 
distinct and have nothing in common. The cus- 
toms districts, or ports of entry and delivery, are 
established by Congress, while the internal revenue 
districts are designated by the President. There 
is no attempt made to make these districts corre- 
spond to each other, and with one or two excep- 
tions the internal revenue districts, designated by 
the President, and the customs districts, estab- 



1^2 FEDERAL FINANCES. 

lished by Congress, are entirely dissimilar. The 
number of revenue districts designated by the 
President are made entirely with reference to the 
volume of business in a State, and with a view to 
the convenience of the government in collecting the 
revenue. In Iowa there are two revenue districts, 
while in Kansas there is but one. Connecticut and 
Rhode Island are comprised in one district, owing 
to the smallnessof these States. Kentucky being 
agreat tobacco producing State, and also containing 
a great many distilleries, is divided into five col- 
lection districts. 

The internal revenue tax, or stamp tax, is very 
simple in operation, and is easily understood. The 
first step taken in collecting the revenue tax may be 
said to begin in the Bureau of Engraving and Print- 
ing at Washington, where the revenue stamps are 
made under the direction and by order of the Com- 
missioner of Internal Revenue. The stamps are 
furnished to the collectors of the different districts, 
who in turn sell them to distillers and manufacturers 
of tobacco. Before a distiller of fermented liquors 
can sell a barrel of beer he must pay to the gov- 
ernment a tax of one dollar a barrel. To do this 
he must go before the revenue collector of his dis- 
trict and buy a one dollar revenue stamp and paste 



FEDERAL FINANCES. I 73 

it on his barrel of beer. The stamp thus fastened 
to the barrel of beer is a receipt showing that the 
tax on that particular cask of beer has been paid. 
In the same way a tobacconist who puts up a box 
of one hundred cigars, must pay a tax of thirty 
cent^ to the government, and the receipt or stamp 
that he gets for the thirty cents he must fasten to 
the box of cigars. The reason for requiring articles 
subject to a revenue tax to be stamped with these 
receipts, is to enable the revenue officers to more 
easily collect the internal revenue, and it is a system 
which greatly reduces the chances of the manu- 
facturers evading the taxes. 

This is a somewhat elementary statement of the 
internal revenue system, but the subject will be 
developei^ and more fully elucidated in the next 
chapter. 

The table given below will show from what 
sources the internal revenue is derived, and the 
total amounts received from all internal revenue 
sources for the last, two years: 



Objects of Taxation. 



Receipts during fiscal year 
ended June 30, — 



1890. 



SPIRITS. 
Spirits distilled from apples, peaches and 

grapes 

Spirits distilled from materials other than ap' 

pies, peaches and grapes 

Rectifiers (special tax) 

Retail liquor-dealers (special tax) 

Wholesale liquor-dealers (special tax) 

Manufacturers of stills (special tax) 

Stills and worms manufactured (special tax) . . 

Stamps for distilled spirits intended for export 

Total 



$1,165,371.91 

68,281,803.93 

166,645.77 

4,296,780.04 

391,975.28 

1,216,70 

3,160.00 

5.252-70 



75,i8t, 

184, 

4.534, 

421, 



,685.90 
,700.09 
,174-81 
.738.57 
,006.70 



$74,312,206.33 



TOBACCO. 

Cigars and cheroots 

Cigarettes 

Snuff 

Tobacco, chewing and smoking 

Dealers in leaf tobacco (special tax) 

Dealers in manufactured tobacco (special tax) 

Manufacturers of tobacco (special tax) 

Manufacturers of cigars (special tax) 

Peddlers of tobacco (special tax) 

Total 



$11,602, 

1,075, 

645, 

17,076, 

48, 

1,280, 



089 57 
.899.94 
841.72 
015-93 
5,128,25 
3,195-53 
2,701.88 



512,263, 
1,116, 

737, 
18,325, 



[,331," 



$31,866,860.42 



$33,958,99^ 06 



lar| 



FERMENTED LIQUORS. 

Ale, beer, lager-beer, porter, and othe: 

fermented liquors 

Brewers (special tax) 

Retail dealers in malt liquors (special tax) 

Wholesale dealers in malt liquors (special tax) 
Total 



$23,235,863.94 
178,593.95 
139,792.38 
169,584.99 



$23,723,835.26 



$25,494,798.50 
172,908.47 
147,673. t6 
[93,154-61 



$26,008,534.74 



OLEOMARGARINE. 

Oleomargarine, domestic and imported j 

Manufacturers of oleomargarine (special tax) . 
Retail dealers in oleomargarine (special tax) . I 
Wholesale dealers in oleomargarine (special I 

tax) I 

Total r 

BANKS AND BANKERS, NOT NATIONAL. i 

Banks, bankers, and other parties liable on 
amount of notes of any person. State bank, 
or State banking association, or of any town, 
city, or municipal corporation paid out by 

them 

Total 



$677,302.40 
12,400,00 
130,631.51 



$894,247.91 



$619,205.72 
11,700.00 
100.068.00 

55,318.00 
$786,291.72 



MISCELL.\NEOUS. 

Collections not otherwise provided for. . 
Penalties 



$6,213.91 



$69.90 



$6,213.91 



Total 

'Aggregate receipts. . 



$6,078.48 

84-991-89 



$16,715.16 
136,720.90 



$153.434-06 



$130,894,434.20 



>i42,594,696.57 



CHAPTER XVII. 

OFFICERS OF INTERNAL REVENUE. 

The chief officer of the internal revenue system 
is called the Commissioner of Internal Revenue. 
He is appointed by the President, with the advice 
and consent of the Senate, and has his office in the 
department of the treasury. The commissioner of 
internal revenue has the general superintendence 
of the assessment and collection of the internal 
revenue taxes; and he prepares and distributes all 
the instructions, regulations, directions, forms, 
blanks and stamps pertaining to the collection of 
the revenue taxes. The commissioner receives a 
salary of six thousand dollars a year, and is assisted 
by a deputy commissioner and a number of clerks. 

The next officers in line of importance after the 
commissioner are those of collectors. The Presi- 
dent appoints a collector for each collection district 
in the Union. Every collector, before entering upon 
the duties of his office, is required to execute a 
bond for such amount as may be prescribed by the 
commissioner of internal revenue for the faithful 
performance of the duties of his office according to 



1^6 FEDERAL FINANCES. 

law. Collectors of internal revenue have the power 
to appoint deputy collectors for their respective 
districts, but a collector must not appoint more 
than two members of the same family to positions 
in the revenue service of his collection district. 

Collectors are required, to give their personal 
attention to all their official duties. They are not 
allowed to leave their districts without first making 
application to the Secretary of the Treasury for 
leave of absence. The collector must not even 
leave his office to visit some other portion of his 
district without first notifying the commissioner of 
his intended absence and reporting the name of the 
deputy left in charge of his office. 

The principal work of the collectors and their 
deputies is to collect all revenue taxes imposed by 
law in their respective districts. The collector 
must send his deputies through his district to can- 
vass for objects of taxation. It is not sufficient that 
collectors assess and collect the revenue taxes which 
are in sight, but they are especially required to 
search for sources of revenue that do not appear on 
the surface. They must require their deputies to 
visit all parts of their respective districts at least 
once a month. The deputies are required to make 
frequent visits to distilleries, breweries, tobacco 



FEDERAL FINANCES. ijj 

and cigar manufactories, and all places where tax- 
able objects are kept. A collector, to efficiently 
supervise the work of his deputies and other sub- 
ordinate officers, should be familiar with the con- 
struction of distilleries and breweries, the process 
of producing and manipulating distilled spirits, the 
manner of brewing fermented liquors, the manufact- 
ure of cigars, tobacco, opium and oleomargarine. 

The next officers of importance are the gaugers. 
The internal revenue gaugers are appointed by the 
Secretary of the Treasury upon the recommenda- 
tion of collectors, indorsed by the Commissioner. 
The duty of a ganger is to measure and ascertain 
the amount of distilled spirits in his district. The 
revenue from distilled spirits largely exceeds that 
from any other source, and to the ganger is intrusted 
the responsible duty of determining the tax due 
from this product. In order that the government 
may secure a just tax from this source, it is neces- 
sary that the ganger execute his work with the 
utmost fidelity, accuracy and care. The gauger's 
office is so important that it is strange that the law 
declares that the compensation of a ganger shall 
not exceed five dollars per day. 

Before an internal-revenue ganger can be assigned 
to duty, he must take an oath to faithfully perform 



I 78 FEDERAL FINANCES. 

his duties, and he must give a bond for not less than 
five thousand dollars, with sureties to be approved 
by the commissioner. The number of gaugers as- 
signed to a revenue district depends entirely upon 
the number of distilleries and the amount of work 
to be done. The ganger works under the super- 
vision and direction of the collector of the district to 
which he may be assigned, and the collector may 
assign gaugers to duty at any place within his dis- 
trict, or transfer them from one place to another at 
his pleasure. 

In measuring the capacity of casks and packages 
and ascertaining the amount of gallons of spirits 
therein, the ganger must use the following instru- 
ments: The head-rod, the bung-rod, the mean- 
diameter scale, the wantage-rod, and the caliper. 
The law is so particular in reference to the duties of 
gaugers that it even specifies the kind of instruments 
that must be used. For instance, the wantage-rod 
to be used must be " Prime's Patent Wantage Rod." 
The instruments used in determining the proof of 
the spirits are the hydrometer and thermometer. 
Any thermometer may be used, but the hydrometer 
prescribed for use in the internal-revenue service is 
after the scale prepared by Professor McCulloch and 
adopted by the Treasury Department. To use any 



FEDERAL FINANCES. 170 

other instruments than those prescribed would sub- 
ject the gauger to dismissal from office, and he 
would be held responsible on his bond. 

The methods used in ascertaining the amount of 
taxable gallons of spirits in a cask, and the rules 
followed in testing the "proof" of liquors and 
making allowances for " wantage," are too complex 
to undertake an explanation of the same in a work 
of this kind. It is sufficient to say that the 
" proof" of the spirits indicates the strength of 
it. Alcoholic liquor which contains one-half its 
volume of alcohol of a specific gravity of .7939 at 
sixty degrees Fahrenheit, is held to be proof spirits. 
A ten gallon cask of liquor at correct proof is held 
to be ten gallons, but if the Hquor was a half 
stronger, that is if it contained three-fourths its 
volume of alcohol, it would be measured and taxed 
as fifteen gallons of spirits. Wantage is an allow- 
ance made for shrinkage where spirits have been in 
warehouses for a long time, and is figured up by the 
gauger from tables and averages furnished him by 
the commissioner of internal revenue. 

It is the duty of the gangers to put upon each 
cask or package gauged by them all the marks, 
brands and stamps required by law and regulations; 
and to see that in all respects each cask or package 



l8o FEDERAL FINANCES. 

is in a condition to be put upon the market without 
being subjected to detection or seizure. The gauger 
must personally gauge the packages, and deter- 
mine the volume and the true per cent, of proof of 
their contents. He must also " with his own 
hands " put upon each cask or package the revenue 
stamps required, and under no circumstances must 
the gauger delegate these duties to an assistant. So 
particular and careful must the gauger be in doing 
his work, that he must not allow his stencil, with 
which he cancels stamps after having affixed them 
to casks, to go out of his possession for one minute. 
Gangers are made the custodians of the receiving- 
rooms at distilleries, and are held responsible for 
the safe keeping of the spirits run into the receiving 
cisterns until drawn off by them and delivered in 
proper manner into the custody of the storekeeper 
at the distillery bonded warehouse. 

Storekeepers are the next important officers that 
belong to each collection district. They are ap- 
pointed by the Secretary of the Treasury and re- 
ceive four dollars a day for their services. They 
must give bond for the faithful discharge of their 
duties in such form and for such amount as the 
commissioner may prescribe. 

The number of storekeepers in a district depends 



FEDERAL FINANCES. j g j 

upon the number and size of the distilleries. Large 
distilleries and breweries that run day and night 
must have two or more storekeepers. The store- 
keeper has charge of the storage room, or ware- 
house, which must adjoin each distillery, and no 
one, not even the owner, can enter the warehouse 
except in presence of the storekeeper. When the 
storekeeper leaves the warehouse he locks the doors 
with a government lock and keeps the key in his 
own possession. 

Storekeepers are required to be present at their 
places of duty during the hours for which they are 
assigned. Those assigned to day duty are required 
to be present at the place of duty during all the 
hours of the day, and night storekeepers during all 
the hours of the night, whether the distilleries are 
operated or not. The storekeeper superintends the 
weighing of the meal before it is put into the mash 
tub, and makes a record of the hour and minute 
when the fermenting tubs are filled. He is to note 
carefully the character and condition of all connec- 
tions, pipes, tubs, or vessels used for conducting 
spirits in the course of distillation, to see if they are 
continuous and closed, as required, and if the dis- 
tiller can have any access to the spirits while in 
transit. He is required to be present at the draw- 



I 82 FEDERAL FINANCES. 

ing of all spirits from the receiving cisterns, and at 
the gauging, marking, branding and stamping of all 
packages of spirits put up on the distillery premises, 
and he is held jointly responsible with the ganger 
that all the duties connected therewith are faith- 
fully performed. Whenever a storekeeper finds 
anything wrong about the distillery premises, or has 
reason to suspect that the law has not been fully 
complied with, it is his duty to report the same to 
the collector of the district. 

There is yet another class of officers to be con- 
sidered. These are the special agents, who, in a 
measure, act as detectives, and who travel from one 
district to another. There are only twenty of these 
special agents, and they are appointed by the Com- 
missioner of Internal Revenue. These agents have 
extensive powers conferred on them, and they may 
enter a distillery at any time and make an examina- 
tion of the premises, and they have the right to look 
over the books of a collector at any and all times, 
whenever, in their opinion, the accounts of a col- 
lector need to be looked into. It will be seen that 
these special agents are to act as a check or guard 
upon the other internal revenue officers. As the 
collectors, storekeepers and gaugers never know 
when to look for the special agent, the result is that 



FEDERAL FINANCES. x8^ 

they are usually prepared for a visit from this 
officer. The uncertainty of the agent's coming and 
the suddenness with which he is known to some- 
times appear, has a salutary effect upon the col- 
lector and his officers. Unless a collector is sup- 
posed to be dishonest, however, a special agent is 
never sent to examine into the accounts of his office. 

In consequence of the limited number of special 
agents and the extent of the territory over which 
they must travel, requires that the agent should be 
industrious and vigilant. He must be thoroughly 
familiar with the internal revenue laws, the regula- 
tions of the commissioner's office, the powers and 
duties of officers, and the construction and opera- 
tion of distilleries, rectifying houses, breweries, and 
tobacco, cigar, opium and oleomargarine manu- 
factories. Especially must the agent be acquainted 
with the appearance of all revenue stamps and the 
method of cancellation. He must be an expert in 
examining and detecting frauds that are sometimes 
attempted by the use of counterfeit or the re-use of 
genuine stamps. 

It is the duty of the special agent to visit whole- 
sale liquor dealers as often as possible, to see if they 
are complying with the law. In visiting the whole- 
sale Hquor dealer's store the agent should make it 



184 FEDERAL FINANCES. 

a point to find out whether the dealer is liable to 
pay the special tax of a rectifier. As every recti- 
fier must pay a special tax of $100, there is occa- 
sionally a small wholesale dealer who endeavors to 
evade this tax. Should the agent find any burnt 
sugar, syrups or flavoring extracts around the 
premises of a wholesale liquor dealer, he is apt to 
make a thorough examination with the result, usu- 
ally, that the dealer is also a rectifier. The recti- 
fying houses must also be frequently visited by the 
agents, and if any irregularities are discovered the 
agent must enter into a minute examination of the 
establishment. It requires skill and a thorough 
knowledge of revenue afifairs to discover frauds in 
rectifying houses. In the same way the agent must 
visit and examine breweries, cigar factories, tobacco 
and snuff manufactories, and all places where oleo- 
margarine and opium are made. These must be 
examined in the same careful and pains-taking man- 
ner as are distilleries and rectifying houses. 

Special agents are always men of considerable 
intelligence and long experience in revenue mat- 
ters. They receive large salaries, but the amounts 
are not fixed by law. An appropriation is made 
for these officers, but the amount that each one is 
to receive is left in the hands of the commissioner. 



CHAPTER XVIII. 

DISTILLERIES. 

Every person who produces distilled spirits, or 
who brews or makes mash, wort or wash, fit for 
distillation, or for the production of spirits, or who, 
by any process of evaporation, separates alcoholic 
spirits from grain, molasses, fruit or any other sub- 
stances fermented, or who, making or keeping 
mash, has also in his possession a still, is, under the 
provisions of law, regarded as a distiller. 

Every person having in his possession or under 
his control any still, whether it is purchased from 
another or whether it is a new still just set up, is 
required to register the same with the collector of 
the district in which such still is located. Any still 
or distilling apparatus must be registered, whether 
intended for use or not. Any still not so registered 
is subject to forfeiture to the United States, and 
the owner is subject to pay a penalty of five hun- 
dred dollars and to a fine of one hundred dollars, 
and to imprisonment for a term not to exceed two 
years. 

Every person who wishes to engage in the busi- 
185 



I 86 FEDERAL FINANCES. 

ness of distiller, must, before he commences opera- 
tion, give notice of such intention to the collector 
of the district, who forwards a copy of the notice to 
the Commissioner of the Internal Revenue. The 
next step of the person intending to start a distillery 
is to have made, under the direction of the collector 
of the district, an accurate plan and description of 
the distillery and distillery premises. The law is 
very exacting in regard to the plans of a distillery, 
and exacts an accurate plan and description of every 
" boiler, doubler, worm-tub, and receiving-cistern, 
the course and construction of all fixed pipes used 
or to be used in the distillery, and of every branch 
and every cock or joint thereof, and of every valve 
therein, together with every place, vessel, tub, or 
utensil from and to which any such pipe leads, or 
with which it communicates." One copy of this 
plan and description shall be kept displayed in some 
conspicuous place in the distillery, one copy fur- 
nished to the collector of the district, another copy 
transmitted to the Commissioner of Internal Rev- 
enue. This minute and exhaustive report of the 
plan of a distillery, would indicate that Uncle Sam 
starts out with the determination of not being de- 
frauded out of any part of the internal revenue. 
After having complied with these requirements 



FEDERAL FINANCES, jg? 

the distiller must, before he begins active operations, 
give a special notice to the collector of the district, 
and file a bond with the Commissioner of Internal 
Revenue conditioned that he shall faithfully comply 
with all the provisions of law relating to the duties 
and business of distillers, and that he shall pay all 
penalties incurred or fines imposed on him for a 
violation of any of the provisions of law. 

Distilleries must be constructed in accordance 
with the regulations of law. These specifications 
are set forth with much detail. To begin with, the 
door of the furnace of every still or boiler used in 
any distillery must be so constructed that it maybe 
securely fastened and locked. This must be so done 
that the government locks may be apphed, and so 
as to efiectually prevent the doors from being open- 
ed, or the fires Hghted in the furnace when locked. 
Then the fermenting tubs must be so placed as to 
be easily accessible to any revenue officer, and 
must each have painted thereon in oil colors its 
cubic contents in gallons, with the number of the 
tub, in figures not less than three inches in length 
and two and a half inches in breadth, which number 
must correspond wath that given in the notice and 
on the plan. And then there must be a clear space 
of not less than one foot around every wood still, 



I 88 I^EDERAL FINANCES. 

and not less than two feet around every doubler 
and worm-tank. Pipes must be painted as follows: 
Those for the conveyance of mash, a red color; those 
for the conveyance of low wines back into the still 
or doubler, blue; those for the conveyance of spirits, 
black, and those for the conveyance of water, white. 
The distillery must be so constructed as to render 
it impossible for more grain to be added to the 
mash without the knowledge of the storekeeper, 
after the proper quantity of each kind of grain has 
been weighed out by him. It is therefore prescrib- 
ed that, in all grain distilleries, the meal-room shall 
be locked and otherwise secured by proper fasten- 
ings, and the meal-hoppers, through which the meal 
is conveyed to the mash-tub, shall be securely 
covered and locked, the storekeeper having pos- 
session of the keys. 

The owner or agent of any distillery must erect 
two or more receiving cisterns, each one to be at 
least of sufficient capacity to hold all the spirits 
distilled during a day of twenty-four hours. These 
receiving cisterns must be placed in a room con- 
structed in such a manner that no person can enter 
in the absence of the ganger without detection. 
The ceiling and walls inside of this room must be 
plastered or cased with matched boards. The floor 



FEDERAL FINANCES. igg 

must be of brick or stone laid in cement, or if the 
floor is of flooring plank, it must be tongued and 
grooved and laid double. To the windows must 
be affixed solid shutters of wood or iron, so con- 
structed that they may be securely barred and 
fastened on the inside. The door must be thick 
and substantial, and so constructed that it may be 
securely locked and fastened. The cistern-room is 
under the care and supervision of the storekeeper, 
and the object of having it constructed and guarded 
as here described is to prevent the owner of the 
distillery from drawing ofl" liquors, after they have 
been made, before the spirits have been gauged 
and the revenue tax paid. 

The law requires every distiller to provide, at his 
own expense, a warehouse suitable for the storage 
of distilled spirits, which must be situated on and 
constitute a part of his distillery premises. No 
dwelling house can be used for such purpose, and 
no door, window, or other opening can be made or 
permitted in the w^alls of such warehouse, leading 
into the distillery, or into any other room or build- 
ing. This warehouse must be approved by the 
collector of the district before it can be used to 
store liquors in. The owner of the distillery must 
furnish to the collector a description of the ware- 



I 90 FEDERAL FINANCES. 

house, setting forth its dimensions in length, width 
and height, and number of rooms ; describing 
particularly all the openings and connections. 
Upon receipt of this application the collector will 
make a careful examination of the premises pro- 
posed, and if they are found to be in conformity 
with the requirements of law and the regulations, 
he must indorse his approval thereon, and transmit 
the application to the commissioner's office at 
Washington. 

After distillation, spirits are conducted by means 
of pipes to the large vats in the cistern room, where 
the spirits are kept for a day or two, under the care 
and watch of the storekeeper. From the cistern 
room the spirits are drawn off in barrels, under the 
joint supervision of the storekeeper and the ganger. 
As the spirits are placed in barrels, the ganger tests 
the proof and estimates the number of gallons 
dr^wn off. After the spirits are placed in barrels, 
they are removed to the bonded warehouse adjoin- 
ing the distillery. Here the spirits are kept, under 
the charge of the storekeeper, until such time as 
the owner may desire to place a quantity of his 
liquors upon the market. He is not required to 
pay the revenue duty until he desires to move the 
distilled product from the bonded warehouse, pro- 



FEDERAL FINANCES. igi 

vided he moves the spirits within three years after 
having placed them in bond. When spirits are re- 
moved for sale, the ganger is again present, and 
sees that every cask and barrel removed has upon 
it the proper revenue stamp. 

The total amount of spirits gauged for the fiscal 
year ending June 30, 1890, was 324,175,208 gal- 
lons. This statement does not include fermented 
liquors, of which 25,494,798 barrels were brewed. 



192 



FEDERAL FINANCES. 



The following statement shows the number of dis- 
tilleries registered and operated during the year 
1890: 





Grain, 


Molasses. 


Fruit. 


t 
'So 

5 




States and Territories. 


1 
'So 


1 




t 
i 

"« 

« 


1 









CS 



5 


Alabama 


5 
39 

3 
104 
18 
14 


4 
37 

i 

18 
14 






151 

42 
286 

43 
462 

18 

56 
3 

477 

35 
3 


151 
42 

274 
43 

459 

^6 
3 

468 

35 
3 


156 
81 

287 
46 

566 
36 
70 
4 
2 

871 
20 
58 
12 

126 

2 

62 

5 

54 

2,091 

67 

7 

122 

70 

296 

35 

1,222 

55 

4 

6,430 


155 






















46 
555 

60 


Georgia 






Illinois 












Iowa 












2 

857 




393 


388 


^ 


I 


I onisiana 


Maryland 


23 
I 

2 
50 

I 


23 

I 
2 
47 

I 






58 




8 


8 




12 


Missouri 






76 


73 


^ 


Nebraska 






120 


New Hampshire 


I 


I 


61 
5 
52 
1,562 
39 

13 
52 
204 
26 
1,1^7 
51 


61 

5 

52 

1.549 

33 

7 

13 

52 

203 

26 

1,130 

42 


' 




1 


I 


62 








New York . 


529 


426 
23 








North Carolma 






1,975 
56 


Ohio 






Oregon 








'18 
92 
9 
85 
4 
4 


108 
17 
85 

83 
4 
4 








South Carolina 







ii 








Texas 
















46 
4 
















4,804 


Total 


1.536 


1,397 


10 


10 


4,884 


6,211 





CHAPTER XIX. 

REVENUE FROM DISTILLED SPIRITS. 

The reader may think it strange that in a work 
treating of the financial income of the United States, 
that so much has been said about distilleries and 
breweries, the mere mention of which suggests the 
odor of sour mash and fermenting malt. It is an 
uninteresting and prosy subject, but so long as the 
government received a tax from distilled spirits, a 
work of this kind would not be complete, unless it 
enters fully into the details of collecting the tax 
from this source. 

The government is not in partnership with dis- 
tilleries, but it has to a certain extent a proprietary 
right in every distillery and brewery in the United 
States, and to protect its rights and to prevent 
frauds, the government has an agent to stand over 
every still-tub and a guard to watch every barrel of 
whisky that is made. It is not the intention here 
to criticise this feature of our internal revenue law, 
because watchful interest in every still is necessary 
to carry out one of the best indirect systems of tax- 
ation that was ever devised. If we must have an 

13 193 



1 94 FEDERAL FINANCES. 

excise tax there is certainly no one article upon 
which it can be placed to better advantage than 
upon distilled spirits. 

The government control of distilleries does not 
encourage this industry, but acts as a check upon 
what would otherwise be free and unlimited manu- 
facture of alcoholic spirits. Rum is not a necessity, 
and by making it expensive, it curtails its use, and, 
in addition, affords a revenue to the government. 

If it were not for the two-hundred-dollar license 
that every still must pay, who doubts but that 
every neighborhood would be supplied- with a still? 
As it is, only those who enter the business on a 
large scale can afford to pay the license and the 
revenue tax. This curtails the number of distil- 
leries, and must, in a measure, lessen the amount 
of spirits produced. Before distilleries had to pay 
a license, and when there was no revenue tax on 
alcoholic spirits, there was hardly a village in the 
country that was not supplied with a distillery, and 
the farmers hauled their corn to the still as they 
now take their cane to a sorghum mill or their 
apples to a cider press. All who are familiar with 
the history of this country, know that in the days 
when there was no internal revenue tax on distilled 
spirits, distilleries were as numerous as grist mills, 



FEDERAL FINANCES. igc 

and whisky as plentiful as cider. The result 
was that, being cheap, it was drank freely and 
copiously. 

But the object of this chapter is to explain how, 
where and when the revenue tax is collected on 
distilled spirits. For this purpose let us follow the 
government agents in the discharge of their duties 
from the time the grain arrives at the distillery 
until it comes out as distilled spirits, and the gov- 
ernment has received the revenue tax on the same. 

To begin with, when a wagon or car load of 
grain comes to the distillery, it is weighed by the 
government storekeeper, as well as by the owner 
of the distillery, and then placed in the grain room, 
which is under the joint care of the storekeeper 
and the owner of the distillery. The storekeeper 
is present when the meal is weighed off and put in 
the fermenting tub, and he makes a note of the 
hour when the fermenting begins in each tub. He 
must watch that no more meal is added to the tubs, 
and at noon on each day thereafter, and until the 
doubling is made, he must note the temperature 
and gravity of the mash in the fermenting tubs. 
He must also note the hour and the minute when 
each fermenting tub is emptied. 

When distillation is complete, the spirits condense 



196 FEDERAL FINANCES. 

in the long coil of pipes and empty into one of the 
receiving cisterns in the cistern room. As before 
explained the cisterns are under the watch of the 
storekeeper, and there is but one set of pipes by 
which the liquor can be taken out, and the faucets 
to these are locked and the ganger holds the keys. 
It must be remembered that as the liquor is dis- 
tilled it runs directly to these cisterns, and the 
pipes leading from the still to the cisterns are so 
constructed and are so carefully guarded by the 
revenue officials that the owner of the distillery 
cannot draw off a drop of the spirits belonging to 
himself until it reaches the cistern room, and then 
he can only draw it from the cisterns in the pres- 
ence of the storekeeper and ganger. Cisterns must 
be emptied at least once every three days. At 
such times, the ganger comes with his gauging in- 
struments and a supply of warehouse stamps. The 
owner of the distillery, or his agent, the store- 
keeper and several assistants are usually present. 
The ganger tests the " proof" of the spirits, and 
ascertains the number of gallons in each barrel or 
cask as it is filled from the cistern. He then pastes 
upon each package a warehouse stamp, on which is 
written the number of gallons of spirits in the pack- 
age. This warehouse stamp permits the owner to 



FEDERAL FINANCES. igj 

remove the spirits to the bonded warehouse which 
is connected with the distillery. 

When a distiller wishes to remove spirits from 
the bonded warehouse he must make an appHcation 
to the collector of the district for a permit to do so. 
When this is granted, the distiller buys enough 
revenue stamps to pay the tax on the quantity of 
spirits he wishes to remove from the warehouse. 
These are always furnished in denominations that 
will exactly pay the tax on the package in the sizes 
in which they are usually put up. The stamp to 
pay the tax on a barrel of whisky costs about 
thirty dollars. If the distiller desires to remove 
fifteen barrels of spirits, he must purchase four 
hundred and fifty dollars worth of revenue stamps, 
or, in other words, he must pay a tax of four 
hundred and fifty dollars to the government of the 
United States, and the government's agent, the 
collector, must give the distiller fifteen thirty-dollar 
receipts, showing that this amount of taxes has been 
paid. The distiller then takes these receipts, or 
revenue stamps, as they are called, and pastes them 
on the barrels or casks in his warehouse. The ganger 
is again sent for, and this time he comes with his can- 
celing stencil. The storekeeper must again be pres- 
ent, and if everything is regular and the proper tax- 



198 FEDERAL FINANCES. 

paid stamp affixed to the barrels or casks, the gauger 
cancels the stamps, and, with a die, he cuts or 
burns upon the head of the cask the name of the 
distiller, the district, and the date of the payment 
of the tax. 

This is the last act of the government in watching 
and guarding the manufacture of distilled spirits. 
Having followed the process from the time the 
grain came upon the distillery premises until it 
came out a distilled product, and then having 
guarded it until the tax is paid, the government 
turns the product over to the owner, and he may do 
with it 'as he pleases, except that wherever the 
packages go they must have affixed to them the 
revenue stamp, which is evidence that the tax has 
been paid. 

The total amount of revenue taxes received from 
distilled spirits for the year ending June 30, 1 890, 
was $81,687,375.09. 



CHAPTER XX. 

REVENUE FRAUDS. 

Before the present methods of guarding the 
internal revenue were adopted, frauds were very 
common, and the government was annually cheated 
out of millions of dollars. In forming the present 
system for the collection of internal revenue, the 
government has profited by past mistakes, and the 
internal revenue system is now much more exact 
in its workings than the system of tariff duties on 
imports. 

In 1865, when the tax was $2 a gallon, many 
distilleries sold whisky for $1.90 per gallon. It is 
evident that this could not be done unless the tax 
was evaded on more or less of the amount sold. 
Here is one of the methods by which frauds were 
committed at that time : The law allowed the dis- 
tiller to remove spirits from one bonded warehouse 
to another before the tax was paid. With a priv- 
ilege like this it was easy for the manufacturers to 
evade a good deal of the revenue tax. Under this 
law the manufacturer would secure a permit to 

remove his spirits from one warehouse to another. 

199 



200 FEDERAL FINANCES. 

Haifa dozen wagon loads would be started at once, 
one of which would reach the second warehouse 
and five of which would be run off and hid. One 
reason why so many frauds were committed on the 
revenue during the war, and thereafter for several 
years, was owing to the high revenue tax on manu- 
factured spirits. It paid to avoid the duty, and 
therefore the temptation to do so was great. Illicit 
stills sprung up .everywhere, and it was not until a 
considerable reduction in the tax on spirits was 
made that the number of these stills were reduced. 
But illicit stills were nothing compared with the 
wholesale frauds committed during Grant's second 
administration, and known as the " whisky frauds." 
These frauds were committed by the distillers and 
rectifiers of St. Louis, Chicago and Milwaukee, 
through the assistance of numerous officials of the 
government. The method of defrauding was by 
the secret shipment of whisky which was reported 
to be stored. Suspicion was first aroused in 1874 
by a discrepancy discovered between the returns of 
shipments of the Merchants' Exchange of St Louis 
and those of the revenue officers. Benjamin H. 
Bristow, Secretary of the Treasury, was instru- 
mental in breaking up this great conspiracy. The 
ring included many officials high in public Hfe, be- 



FEDERAL FINANCES. 20I 



sides many collectors, gaugers, storekeepers, dis- 
tillers and merchants and agents. The ring was 
powerful, and for a time it resisted every effort 
made to unearth the fraud and bring the guilty 
persons to justice. The seA-etary employed skilled 
detectives, and finally, after a number of secret 
examinations had been made, a general seizure in 
three cities was made May lO, 1875. Two hundred 
and thirty-eight persons were arrested, and $3,- 
500,000 worth of property was seized. It was on 
this occasion that President Grant wrote the famous 
sentence: "Let no guilty man escape." Many 
arrests and convictions followed, and the ring was 
soon broken up. 

There is a peculiar method of running ilHcit stills 
known as " moonshining." An unregistered still in 
a city, hidden away in some cellar or attic, would 
be called an illicit still; but a still hidden away in 
some wild and thinly-settled section of the country 
is called a " moonshine " still, for the reason that 
these stills are usually operated at night. For- 
merly, moonshine stills were largely operated in 
the dark and secluded forests of Vermont, New 
Hampshire and Maine, but of recent years moon- 
shining has been mostly confined to the mountain- 
ous region of the Southern States. 



202 FEDERAL FINANCES. 

The Cumberland and Blue Ridge Mountains, 
which rise in Kentucky and Virginia, and extend 
into the North part of Georgia and Alabama, to- 
gether with the Ozark Mountains of Arkansas and 
thehills of northern Mississippi, form the great moon- 
shine belt of the United States. Through all this 
region the soil is thin and light, the land broken 
and rough, and in many places heavily timbered. 
In the sparsely settled districts the inhabitants are 
the most peculiar that belong to any section of our 
country. The uncivilized being who inhabits the 
mountain ravines of Kentucky and Tennessee, or 
who lives in the backwoods of Arkansas, is some- 
thing of a mystery. The history of these native 
mountaineers has never been written. Through all 
the hilly region, from North Carolina to Arkansas, 
these people look and act alike, and speak a com- 
mon jargon. They must have a common origin, 
and it is quite probable that the first inhabitants of 
the Carolina mountains were the white penal slaves 
that ran away from the old Virginia plantations. 
A vessel, manned by Turkish pirates, was wrecked 
upon the coast of North Carolina during the early 
part of the last century, and, as they flew to the 
mountains for refuge, it is suppose-d that they joined 
the colony of escaped penal slaves that were hiding 



FEDERAL FINANCES. 203 

in these remote fastnesses. It is the descendants 
of these people who have spread all over the mount- 
ainous regions of the South, and are now the most 
skillful and dangerous of moonshiners. The soli- 
tary and secluded life they lead has a melancholy 
effect upon their naturally depraved and sullen 
natures. They are as morose and as revengeful as 
Indians. An injury is never forgiven, and the fire 
of the vendetta never goes out. These traits of 
character have long made the Southern moonshiner 
a troublesome character to the government. 

The moonshine stills, hidden away in the mount- 
ain ravines and defended by desperate men, are 
hard to get at, and the government has spent many 
thousands of dollars in attempting to suppress 
moonshining in the South. It is only within recent 
years that the^efforts of the government in this di- 
rection have been partially successful. The method 
employed by the government in enforcing the law 
against these outlaws is by sending an armed posse 
of special agents and deputies to surprise and capt- 
ure the moonshiners and destroy their stills. These 
raids are made only when the detectives have lo- 
cated a number of stills and outlined a plan which 
it is thought practical to follow. It often happens 
that these raids are unsuccessful, and many govern- 



204 FEDERAL FINANCES, 

ment officials have lost their lives on these expe- 
ditions. Here is an account of a recent raid which 
was successful, and, fortunately, was prosecuted 
without loss of life. 

For a good many years a district known as the 
Pearidge section of southern Kentucky and north- 
ern Tennessee had been infested by a desperate 
band of moonshiners, who had openly boasted that 
no revenue officers dare invade their territory. 
Several attempts had been made, at different times, 
to seize their stills, but without success. Several 
gallant officers lost their lives in these futile at- 
tempts to arrest the moonshiners of Pearidge. One 
of these officers was not only murdered in cold 
blood, but his body was never found. The moon- 
shiners afterward said that it had been burned in 
the furnace of one of their stills, and that it made 
" good fuel to help make a doubling." 

In October, 1889, information came to W. J. 
Wilmore, revenue agent for Kentucky, that several 
of the stills of the ringleaders could be located 
and guides furnished to any posse of government 
officers of sufficient strength to make a successful 
raid. Mr. Wilmore wrote to James S. Battle, reve- 
nue agent for Tennessee, and asked him to co-oper- 
ate with him in a raid on the Pearidge district. It 



FEDERAL FINANCES. 205 

was finally decided to make a joint raid by Ken- 
tucky and Tennessee revenue officers. The general 
deputies, marshals and revenue officers, detailed to 
go on this expedition, met at Gallatin, Tennessee, 
December 10, 1889. The rest of the story can not 
be told better than in the words of Mr. W. G. Dun- 
lap, who was one of the chief officers in charge of 
this expedition: 

" We secured good saddle horses and started at 
once for the scene of action. We reached Harts- 
ville for dinner, and after a tiresome ride through a 
rainstorm that came up in the afternoon, reached 
Carthage for a late supper. Here we understood 
that our coming was known to the moonshiners, and 
they had sent us word that a reception committee of 
thirty-five, armed with Winchester rifles, had been 
selected to entertain us. This was cheerful at the 
outset, and we began to realize that we were on a 
dangerous and important mission. Leaving Car- 
thage at daylight we rode hard all day and reached 
Gainesboro late in the afternoon. Here Marshals 
Henderson, Young, B. C. Brown, J. P. Huddle- 
stom, Sam. M. Tinsley and Russ Maxwell met us. 
They had gone over the ground carefully, and had 
all the information we wanted. We had notified 
all the telegraph operators along our line of travel 



206 FEDERAL FINANCES. 

to allow nothing to go over the wires a head of us. 
This aftewards proved to be an important fore- 
thought. The next day we rode to Livingston and 
that night started into the enemy's country. About 
ten o'clock at night, we forded the Obi River and 
started for Kettle Creek, about five miles away, and 
the home of the men we were after. Away off to our 
left a large bonfire wasburning on the mountain top, 
and several of us felt a suspiciously solemn feehng 
creeping up our spinal column at the idea that 
possibly it was a signal to the " shiners " that 
we were almost upon them, and the desperate 
strait we were in, should this prove to be true, first 
dawned upon us. Joe Spurrier, who knew every 
foot of the ground, took us to the house of Mr. 
McCullom, where we fed our horses and ate a good 
supper. At twelve o'clock, with the moon shining 
brightly, we started for our first still. After a weary 
ride through the woods, as dark as pitch, we came 
to a gloomy hollow with fallen trees and underbrush 
blocking the way, and up on the hillside the out- 
lines of a log cabin could be seen. This was the 
home of Johnson Scott, one of the worst men of 
that section. We quietly divided the men, one 
party surrounded the house and the other made a 
rush for the still. Scott was caught in bed, and was 



FEDERAL FINANCES. 



207 



the most surprised man I ever saw. He said he 
had heard of our coming, but looked for us from 
the north and not from the west, as his spies had 
reported we would come by the way of Glasgow. 
We cut up his still, but found no whisky. Between 
two o'clock and daylight we cut up five stills and 
arrested the men who were running them, meeting 
no resistance, as our coming was a complete sur- 
prise. The next two days we destroyed eight 
other stills, beer tubs, doubler caps, etc., none of 
them complete, with the exception of Jno. Watson's, 
where we found about twenty gallons of whisky, and 
fire burning under the still, with Watson personally 
superintending. He was morose and sullen at first, 
but our uniform, courteous treatment, finally thawed 
him out, and he took us to his house, gave us sup- 
per and fed our horses. When we left he had a 
higher opinion of Uncle Sam than ever before. By 
this time our raid was known in all the adjoining 
counties, and while we found several rude log sheds 
and plenty of evidence of past and contemplated 
occupancy, we saw no more of copper. Our pris- 
oners were handcuffed together, put in charge of 
Deputy Marshal Harlan, and started toward 
Louisville on a boat from Cehna, Tennessee, while 
the posse started for Albany and Burksville, Ky. 



2o8 FEDERAL FINANCES. 

Between these ponts we ran up on Jim Whitehead, 
one of the men who surrounded some revenue offi- 
cers in a thicket, and threatened to burn them in a 
furnace if they could be forced to surrender. He 
was placed under arrest and taken to Burksville. 
Here the posse was photographed in a body, and 
the raid abandoned. We rode over four hundred 
miles horse back, and struck a blow at the heart of 
the worst moonshine section of Kentucky and Ten- 
nessee, from which they will never recover. Since 
that raid, Deputy Collector Spurrier has taken 
several trips to Pearidge, and while he occasionally 
finds a still, he reports that it is no longer the terror 
to revenue officers it was formerly." 

Besides their resistance to the United States mar- 
shals, the moonshiners have a cunning method of 
getting ahead of the government in another direc- 
tion. They maintain a sort of collusion, by which . 
one of their number is occasionally informed upon 
and prosecuted. As a number of witnesses must 
b^ called to sustain the indictment, the moonshiner's 
family, relatives, and all his neighbors are sub- 
poenaed. The witness fees and mileage enables 
them to go to the city and have a good time. The 
one informed on goes to jail, of course, but that is 
not bad living for him, and he returns to his native 



FEDERAL FINANCES. 2O0 

heath the hero of the occasion. The next time 
one of his neighbors is informed upon, and perhaps 
the prisoner of the other occasion will be the pros- 
ecutor this time. By this plan of being prisoner 
turn about, the moonshiners are enabled to have a 
good time and make a little spending money be- 
sides. 

A moonshine still-house is usually a log cabin 
with a clap-board roof held down by logs which are 
pinned to the rafters. When a still-house is built 
in a mountain ravine it is usually constructed by 
setting two posts in the ground, one end of a 
sleeper resting on each one of these posts and the 
other end stuck into the hillside. It is then covered 
with rough clap-boards, and sometimes trees and 
brush are thrown around and over the building to 
hide it from view. 

The article manufactured in these rude and hid- 
den stills is known in that section of the country as 
" mountain dew," and is a very superior article of 
whisky. The " shiners " possess all the requisites 
for making a good article of distilled spirits, viz. : 
hard, flinty corn and pure, clear spring water. The 
products of these illicit stills often go to make up 
some of the brands advertised in southern markets 
as " hand made sour mash whisky." 



CHAPTER XXI. 

TOBACCO, SNUFF AND CIGARS. 

Anyone desiring to enter the business of a 
manufacturer of tobacco must furnish the collector 
of the district in which he proposes to establish his 
business a statement accurately setting forth the 
place where his manufacture is carried on, the 
number and kind of machines kept for use, and the 
kind and quality of his products. Before the manu- 
facturer begins operations he must also give a bond, 
to be approved by the collector of the district, 
conditioned that he shall not engage in any attempt, 
by himself or by collusion with others, to defraud 
the government of any tax on his manufactures; 
and that he shall render truly and completely all 
the returns, statements and inventories prescribed 
by law or regulations. 

Manufacturers of tobacco, who are also dealers 
in tobacco, are not allowed, as dealers, to occupy 
portions of their bonded factory premises for stor- 
ing, selling and delivering such tobacco. Where a 
manufacturer has a retail store in connection with 
his factory, he must have it separated by a partition. 



FEDERAL FINANCES. 2 I I 

This partition may be made of wire netting. The 
object of requiring the salesroom to be separated 
from the factory is to prevent the manufacturer 
from having an undue advantage should he seek to 
evade paying the revenue tax on manufactured 
goods. 

The law requires that all manufactured tobacco 
must be put up in packages of certain descriptions 
and limitations. For instance, plug and twist 
tobacco must be put up in wooden packages not' 
exceeding two hundred pounds net weight, while 
smoking tobacco must be put up in packages con- 
taining not less than two, or more than sixteen 
ounces each. Every package of tobacco must have 
marked thereon the name of the manufacturer, the 
place where manufactured, and the registered num- 
ber of the factory, and the proper revenue stamp, 
together with the following notice: 

" Notice. — The manufacturer of this tobacco has 
complied with all the requirements of law. Every 
person is cautioned, under the penalties of law, not 
to use this package for tobacco again." 

The stamps for the payment of taxes on tobacco, 
snuff and cigars are kept by the collectors of the 
internal revenue, who sell them to the manufact- 
urers. The law provides, very minutely^ just how 



2 I 2 FEDERAL FINANCFS. 

these stamps shall be affixed to the packages. Upon 
all pails, kegs and barrels, the stamp must be pjaced 
across the staves, and be attached to as many 
staves as possible, between the first and second tier 
ofhoops. The stamps upon cigar boxes must be 
so affixed as to seal the box, rendering it impossible 
to open the box and remove its contents without 
breaking or destroying the stamps. 

The stamps are affixed to the packages of tobacco 
by the manufacturer himself, and are also canceled 
by him. In canceling revenue stamps the dealer 
must use a steel die furnished by the commissioner, 
and unless packages are canceled with a govern- 
ment die, they are liable to seizure whenever found. 

The law makes it the duty of every person who 
empties any stamped box, bag, or wrapper of any 
kind containing tobacco to destroy the revenue 
stamp thereon. It may not be generally known 
that accepting empty cigar boxes is an offense 
punishable by fine, but such is a fact. Section 
3,376 of Revised Statutes declares that every per- 
son who sells or gives away or who buys or accepts 
from another any empty stamped tobacco box, 
shall, for each offense be fined one hundred dollars 
and imprisoned for not less than twenty days and 
no't more than one year, fhis provision of the 



FEDERAL FINANCES. 2 1 3 

law in regard to giving away empty tobacco boxes 
is something of a dead letter, and boys and girls 
who beg cigar boxes from a tobacconist's stand are 
not likely to have the full penalty of the law visited 
upon them. Tobacco dealers, however, generally 
obey the provision which forbids the selling of 
empty boxes. 

The regulations governing the manufacture and 
sale of cigars are numerous and exacting. The 
manufacturer of cigars must first give a bond, and 
then he must place a sign on the building used for 
a factory, setting forth in letters three inches in 
length, his name and business. He must then post 
up in a conspicuous place, within the building or 
room used as a factory, the certificate he receives 
from the collector which permits him to employ a 
certain number of cigar-makers. He must pack 
his cigars in boxes not before used for that purpose, 
as described in the general regulations, and in no 
other manner. He must brand, stamp, indent, or 
impress into the boxes containing the cigars manu- 
factured by him, in a legible and durable manner, 
his factory number, the number of cigars in each 
box, the number of the district and the State. He 
must affix a printed label bearing this caution: 

" Notice. — The manufacturer of the cigars herein 



214 



FEDERAL FINANCES. 



contained has complied with all the requirements 
of law. Every person is cautioned not to use either 
this box for cigars again, or the stamp thereon 
again, nor to remove the contents of this box with- 
out destroying said stamp, under the penalties pro- 
vided by the law in such cases." 

He must affix to each box of cigars manufactured 
and put up by him, a proper internal revenue stamp 
to denote the payment of the tax. Having proper- 
ly boxed his cigars and affixed the proper revenue 
stamps, he must, before he sells a box, cancel the 
stamp by using agovernment die in such a manner 
as to destroy the stamp and drive portions of it in- 
to the wood of the box. 

The duties of a cigar manufacturer are so num- 
erous that he may be said to be an internal revenue 
officer. When required to cancel the stamps on 
cigar boxes he is, to a certain extent, performing 
an official act for the government. 

The manufacturers of tobacco and cigars are so 
numerous in this country, that it is only by the ex- 
ercise of the greatest vigilance on the part of the 
local collectors and revenue officers that the tax 
from this source can be faithfully collected. The 
most practical contrivances in the manner of affixing 
and canceling stamps, and of marking and branding 



FEDERAL FINANCES. 215 

packages to prevent frauds, fail to accomplish the 
desired object unless the revenue officers are faith- 
ful and efficient. 

One of the common methods of evading the reve- 
nue tax upon manufactured tobacco and cigars is 
by there-use of stamps, and by the refilling and re- 
use of the stamped packages. Both of these methods 
require, to a greater or less extent, compUcity be- 
tween the manufacturer and dealer in tobacco and 
cigars. The law requires the destruction of stamps 
as soon as the packages are emptied, but instead of 
destroying them the dishonest dealer carefully re- 
moves the stamps, either before or after the pack- 
ages are emptied, and returns them to the manu- 
facturer to be used a second time. 

One of the most effective means of preventing 
frauds in the revenue tax on tobacco is the provis- 
ion of the law requiring dealers in leaf tobacco to 
make detailed reports to the government. Dealers 
in leaf tobacco are required to keep two books, one 
of which is furnished by the government. In these" 
books the dealer is to enter, daily, the amount of 
tobacco he sells, with the name and residence in 
each instance of the person to whom sold, and if 
shipped, to whofn shipped and to what district. 
The entries in both of these books must be in every 



2l6 FEDERAL FINANCES. 

respect identical and original entries. One of these 
books is to be kept at the dealer's place of business, 
and is to be open at all hours to the inspection of 
any internal revenue officer or agent. The other 
book, which is the property of the government, at 
the end of every year is to be handed over to the 
collector of the district for the use of the govern- 
ment. 

Should an inspector have reason to suspect that 
a cigar manufacturer was evading the revenue tax, 
he would have recourse to these books to find out 
the amount of raw material he had purchased. In 
the first place, he would require the manufacturer 
of cigars to produce his books and to show how 
much leaf tobacco he had purchased and who he 
had obtained it from. He would then go to the 
leaf dealer's books and find out if this statement 
was correct. 

The inspectors know about what quantity of 
cigars can be made out of a given amount of 
material. If the cigars made by the manufacturer 
fall a good ways short of the estimated number 
that should be made out of the leaf tobacco pur- 
chased, it is pretty good evidence that fraud is 
being practiced, and the inspector sets about find- 



217 

ing out what and where the fraud is, and he often 
succeeds. 

The method employed by the government in 
collecting the revenue tax on tobacco is not so 
complicated as is the system by which the revenue 
is collected on alcoholic spirits. Government 
officers do not watch the tobacco while in process 
of manufacture as they do spirits, nor are there any 
special officers to watch manufactured tobacco 
while it is in store before being placed upon the 
market, nor are there any officers to affix the stamps 
and cancel them. The manufacturer is his own 
officer. He counts and places his cigars in boxes 
himself, he buys the revenue stamps and affixes 
them to the boxes, and when he makes a sale he 
cancels the stamps on his own boxes. 

The only watchman over him is the inspector, 
but the revenue tax on tobacco is not so easily 
evaded as the duties on distilled spirits, and it is 
not necessary to have so many officers to watch 
this branch of the revenue. This part of the 
internal revenue tax is as closely guarded as any 
other portion of the revenue system, and the in- 
come from the tobacco tax is very satisfactory. 



CHAPTER XXII 

OLEOMARGARINE AND OPIUM. 

The collection of the tax on oleomargarine and 
opium belongs to the department of the interior, 
and is collected in about the same way as is the 
tax on tobacco. 

An act defining butter and imposing a tax upon 
and regulating the manufacture, sale, importation 
and exportation of oleomargarine was passed by- 
Congress in 1886. The law provides: 

" That upon oleomargarine which shall be manu- 
factured and sold, or removed for consumption or 
use, there shall be assessed and collected a tax of 
two cents per pound, to be paid by the manufacturer 
thereof; and any fractional part of a pound in a 
package shall be taxed as a pound. The tax levied 
by this section shall be represented by coupon 
stamps; and the provisions of existing laws govern- 
ing the engraving, issue, sale, accountability, 
effacement and destruction of stamps relating to 
tobacco and snuff, as far as applicable, are hereby 
made to apply to stamps provided forby this action. " 



FEDERAL FINANCES. 



219 



Section 10, of the same act, provides that all 
oleomargarine imported from foreign countries 
shall, in addition to any import duty imposed on 
the same, pay an internal revenue tax of fifteen^ 
cents per pound. 

Manufacturers of oleomargarine must pay a spe- 
cial tax of $600 a year and give a bond for $5,000, 
subject to the approval of the collector of internal 
revenue for the district in which the manufacturing 
estabhshment is located. 

Oleomargarine must be packed in wooden pack- 
ages, not before used for that purpose, in packages 
not less than ten pounds. The manufacturer pays 
the revenue of two cents per pound by purchasing 
the stamps of the collector and affixing them to the 
packages. The manufacturer must also cancel the 
stamp with a steel die, much in the same manner 
as that prescribed for the cancellation of stamps on 
cigar boxes. The manufacturer is required to place 
upon each box or package the following notice : 

" Notice. — The manufacturer of the oleomar- 
garine herein contained has complied with all the re- 
quirements of law. Every person is cautioned not 
to use either this package again or the stamp 
thereon again, nor to remove the contents of this 



2 20 FEDERAL FINANCES. 

package without destroying said stamp, under the 
penalty provided by law in such cases." 

Wholesale dealers in oleomargarine are required 
to pay a special tax of $480 per year. They must 
not sell in quantities less than ten pounds. Retail 
dealers must pay an annual tax of $48. They may 
sell small quantities, but must sell from original 
packages. The law requires that the retail dealers 
sell the article in wooden or paper packages, and 
that each package be labeled " oleomargarine." 

The tax on oleomargarine is not evaded to any 
great extent. The manufacturers are required by 
law to report to the Secretary of the Treasury the 
names and addresses of the dealers to whom they 
sell, and as the manufacturers are under heavy bond 
they comply with the law. The collectors are in- 
formed by the Treasury Department when sales are 
made to dealers in their district. This information 
assists the internal revenue officers in collecting 
the tax from this source, and gives the dealer but 
little chance to defraud the government. 

There are not very many manufactories of oleo- 
margarine in the country. There are only fourteen, 
all told. Five of these are in Chicago, three in 
Pawtucket, Rhode Island, two in Kansas City, and 



FEDERAL FINANCES. 221 

one each at Boston, New Haven, Conn. , Hammond, 
Ind., and Providence, Rhode Island. 

The numerous State laws relating to oleomar- 
garine make it easy for the government to watch 
the manufacture of the article and to collect the 
special license tax from the manufacturers. 

The State law of Colorado provides that no one 
shall manufacture or sell oleomargarine unless he 
obtains a license for such purpose from the county, 
town or city within which such manufacture or sale 
is to be carried on. 

The legislature of Iowa passed a law in 1886 re- 
quiring all manufacturers of imitation butter to 
clearly and durably brand each tub, box, or other 
package, with the true name of the contents. 
Penalties are prescribed for selling imitation butter 
not so marked. When imitation butter is served 
at hotels or restaurants the patrons of the place 
must be notified of the fact by means of a printed 
placard. 

In Massachusetts the law provides that imitation 
butter must be labeled " adulterated butter." 
Retailers must see that each package they sell is 
thus branded, or else they are subject to a fine. 

Nearly all the States in the Union have laws in 



22 2 FEDERAL FINANCES. 

reference to the manufacture of oleomargarine, sim- 
ilar to tlie laws quoted above. 

The new law in reference to a tax on opium pro- 
vides: 

" That an internal revenue tax of ten dollars per 
pound shall be levied and collected upon all opium 
manufactured in the United States for smoking 
purposes; and no person shall engage in such man- 
ufacture who is not a citizen of the United States 
and who has not given the bond required by the 
Commissioner of Internal Revenue." 

The bond required must be for a sum of not less 
than $5,000.00, to fee approved by the Com- 
missioner. The manufacturer of opium must make 
such reports to the collector of the district in which 
his manufactory is located as the Commissioner of 
Internal Revenue may require. 

There are special stamps prepared for payment 
of the revenue tax on opium. The provisions of 
existing laws governing the issue, sale, accounta- 
bility, cancellation and destruction of stamps relat- 
ing to tobacco, as far as applicable, are made to 
apply to- stamps provided for payment of tax on 
opium. 



CHAPTER XXIII. 

SEIGNIORAGE. 

An act providing for the coinage of gold, silver 
and copper, and locating a mint at Philadelphia, 
was approved April 2, 1792. This law made the 
silver dollar the unit of value, and declared that it 
should contain four hundred and sixteen grains of 
standard silver. All other coins, either of a higher 
or lower value, were measured from the unit, or 
the silver dollar. Eagles were each made of the 
value of ten dollars or units, and were to contain 
two hundred and seventy grains of standard gold. 
The other coins provided for were the half eagle, 
quarter eagle, half dollar, quarter dollar, dime, half 
dime, cent and half cent. This law permitted any- 
one to bring gold and silver bullion to the mint and 
have it coined into money free of charge. If the 
person bringing bullion to the mint did not want to 
wait until it was coined, he had the privilege of ex- 
changing his bullion for coined money, less one-half 
per cent, from the weight of the pure gold or silver 
contained in the bullion. 

223 



224 



FEDERAL^ FINANCES. 



In 1873, Congress passed a law making the gold 
one-dollar piece, at the standard weight of twenty- 
five and eight-tenths grains, the unit of value. 
The trade dollar of four hundred and twenty grains, 
troy weight, took the place of the old silver 
dollar that had been so long the unit of value. 
Trade dollars were discontinued in 1887, and the 
silver dollar now in use weighs four hundred and 
twelve and one-half grains troy, but the gold dol- 
lar is the unit of value. By the same law it is pro- 
vided that a charge shall be made for converting 
gold and silver bullion into coin. This charge is 
called " seigniorage," and is for the purpose of 
making the mints self sustaining. In recent years 
the profits from coinage have been more than 
sufficient to pay the expenses of operating the 
mints, and the government derives a small revenue 
from this source. 

By a recent law it is lawful for coinage to be exe- 
cuted at the mints of the United States for any 
foreign country applying for the same.. The charges 
for coining money for foreign countries have, in 
several instances, helped to swell the income from 
seigniorage. 

There are at the present time four mints in the 
United States, and located, one each at Philadel- 



FEDERAL FINANCES. 2 25 

phia, San Francisco, New Orleans and Carson City. 
There are six government assay offices. There is 
one at each of the following places, viz. : New York, 
Denver, Helena, Montana ; Boise City, Idaho ; 
Charlotte, N. C, and St. Louis. The earnings of 
the assay offices do not equal the expenses. The 
work of the assay offices is to convert gold and 
silver bullion into bars, and stamp the weight and 
fineness thereon. 

The following table gives the profits on coinage 
each year for the past ten years: 

88i $ 3,468,485.61 

882 4>ii6,693.73 

883 4,460,205.17 

884 4,250,609.30 

885 6,051,284.96 

886 5,904,619.26 

8S7 8,929,252.83 

888 9,387,634. 48 

889 10,165,264.79 

890 10,217,244.25 

Total $66,951,294.38 



CHAPTER XXIV. 

PUBLIC LANDS. 

The receipts derived from the sale of public lands 
is not a revenue received from taxation, but is an 
income from an inheritance. When the Articles of 
Federation were adopted and the States became a 
confederacy, those entering into the compact ceded 
the unowned territory within their respective juris- 
dictions to the general government. In 1780 New 
York ceded to the government all its right and 
title to the land formerly belonging to the Indians, 
which the State had acquired by treaty. Virginia 
responded in 1784, by ceding to the government 
all her claims northwest of the Ohio River. Two 
years after this, Connecticut came forward and laid 
at the feet of the government a tract of land 
between 41° and 42° 12' west of a meridian 120 
miles west of the Pennsylvania line. In 1787, South 
Carolina handed over to the government a twelve- 
mile strip of territory, running from the source of 
the Savannah river to the Mississippi. 

These cessions constituted the entire public 
domain at that time. But Congress took early 



FEDERAL FINANCES. 227 

action toward enlarging the national territory. On 
July 13, 1787, an act was passed, organizing the 
territory between the Ohio and Mississippi Rivers, 
and providing for its future division into not more 
than five nor less than three States. This was called 
the Territory of the Northwest and was claimed by 
the government under the old " from sea to sea" 
charter rights, granted to the old New England 
Colonies. Out of this territory the States of Ohio, 
Indiana, Michigan and Illinois have been carved, 
and the sale of land belonging to this part of the 
public domain was, for a good many years, a source 
of generous income to the Treasury. 

After the adoption of the constitution the new 
republic secured territory very rapidly. 

By the Louisiana purchase, 1803, about 700,000 
square miles were added to the public domain for 
the consideration of fifteen miUion dollars. In 1821 
the United States purchased the territory of Florida 
for five millions. In 1845 the territory now em- 
braced in the State of Texas was annexed to the 
United States. This territory had formerly been a 
part of Mexico. Shortly after this, in 1846, the 
Oregon boundary question was settled. England 
claimed the territory as far south as the Columbia 
River. This claim was based on the discoveries of 



228 FEDERAL FINANCES. 

Captain Cook, made in 1776. The United States 
claimed the territory as far north as 54° 40'. This 
claim was based on the discovery of the mouth of 
the Columbia by Gray in 1792, and the explora- 
tions of Lewis and Clark in 1805. The matter was 
finally settled by compromise, and the northwestern 
boundary fixed at 49° north latitude. This was in 
reality a favorable settlement for the United States, 
and was one more step toward broadening the 
public domain. As a result of the war with Mexico, 
that country ceded to the United States all the 
territory embraced in what was then known as the 
province of New Mexico and Upper California. 
This territory was further enlarged in 1853 by the 
purchase of a strip of country south of the Gila 
River, known as the Gadsden purchase. The price 
paid was ten million dollars. The last acquisition 
of territory was the purchase of Alaska from Russia 
in 1868 for the sum of seven million dollars. 

The sale of the public lands acquired by these 
various purchases and annexations have been a 
source of prolific revenue to the government. The 
new government had only been in operation a 
few years when steps were taken toward disposing 
by sale of parts of the public domain. As early as 
1796 provision was made by Congress for the survey 



FEDERAL FINANCES. 229 

and sale of such lands in the Northwest territory 
as had not previously been conveyed by letters 
patent. This law provided that the land should be 
divided by north and south lines, running accord- 
to the true meridian, and by others crossing them 
at right angles, so as to form townships six miles 
square. These townships are marked with pro- 
gressive numbers from the beginning, and they 
were subdivided into sections containing six hun- 
dred and forty acres each. These sections were 
numbered respectively, beginning with the number 
one in the north section, and proceeding west and 
east alternately through the township, with pro- 
gressive numbers, until the thirty-sixth is com- 
pleted. This system of surveying is still in force, 
all the western country having been surveyed off 
into townships. The unit for measuring land is the 
section containing six hundred and forty acres. 

For the purpose of selling the public lands, 
Congress, in 1812, established a bureau called the 
General Land Office. It was under the supervision 
of the Secretary of the Treasury. When the Depart- 
ment of the Interior was established, in 1849, the 
land office was transferred to this department. The 
General Land Office is now presided over by a 
commissioner appointed by the President. The 



230 FEDERAL FINANCES. 

commissioner, under the direction of the Secretary 
of the Interior, performs all the executive duties 
appertaining to the survey and sale of the govern- 
ment lands. 

For the purpose of selling public land. Congress 
has divided the country into land districts. For 
■ each land district the President appoints a register 
of the land office, and a receiver of public moneys. 
The number of land districts in a State or Territory 
depends entirely upon the amount of public land for 
sale, and the amount of business transacted. The 
new States in the West are bountifully supplied 
with land offices, but some of the older States have 
none. The land offices at Chillicothe, Ohio; India- 
napolis, Ind., and Springfield, 111., were abolished 
several years ago, there being no further need of 
them in those States. Some of the late districts 
established are as follows: The Oneida district in 
Idaho with an office at Oxford; the Yellowstone 
district in Montana, with office at Miles City; the 
Yakima district in Washington, with office at 
Yakima City, and the Colfax district in New 
Mexico, with office at Folsom. 

The lands of the United States are disposed of 
to the people by private and public sale, and also, 



FEDERAL FINANCES. 23 1 

under certain regulations, by what is known as the 
homestead, pre-emption and bounty methods. 

There are two classes of public lands subject to 
entry and sale. One is known as mini7mifn land, 
and is sold at $1.25 per acre. The, other is called 
double minimuin, being the alternate sections along 
the railroad lines, and is sold at $2.50 per acre. 

When land is offered at private sale, it may be 
purchased, at the option of the buyer, in entire 
sections, half sections, quarter sections, half quarter 
sections and quarter quarter sections. The price at 
private sale is $1.25 or $2.50 per acre, as the case 
may be. When land is offered at public sale it is 
sold in half quarter sections to the highest bidder. 

The pre-emption right is the privilege given to 
the settler who first takes up a piece of land and 
begins to improve it. When the land is opened 
up for sale the government gives the settler the first 
chance to buy the land. A citizen of the United 
States may pre-empt in this way not more than one 
hundred and sixty acres. The price paid for this 
land is $1.25 per acre if the land is minimum, and 
$2.50 per acre if it is double minimum. The 
homestead law gives to every citizen the right to a 
homestead of 160 acres of land. To obtain a home- 
Stead the applicant must make oath that he is the 



232 FEDERAL FINANCES. 

head of a family, or over twenty-one years of a^e, 
and a citizen of the United States, or has declared 
his intention to become such; and that the entry is 
for his exclusive use and benefit, and for actual set- 
tlement and cultivation. The fees paid to the gov- 
ernment for securing a homestead are $18. After 
five years occupancy of the land the settler receives 
a patent, or full title, to the same. Under the pro- 
visions of law relating to bounty lands, an ex-sol- 
dier, upon paying the regulation fee of $18, may 
enter 160 acres of land, and the time the soldier was 
in the war is deducted from the five years occu- 
pancy required in the case of the homestead settler. 
It will be seen that the government derives an in- 
come from the disposal of public lands in these in- 
stances no matter by what means conveyed. 

Mining lands have usually been surveyed into 
lots containing forty acres, and sold at auction. 

The method of selling public land is very simple 
in its operation. The would-be buyer must go to 
the land office for the district in which the land he 
wishes to purchase is located, and make application 
to the register of that office. The register has a 
plat of all the lands in his district, and he makes a 
record in his book of the description of the land the 
purchaser makes application for. The price paid 



FEDERAL FINANCES. 233 

for the land, or the entry fee, if taken under the 
homestead law, is paid to the receiver of the land 
office. 

When the tracts of land are opened for sale, and 
the first land office in a district opens its doors to 
transact business, there is always a rush of settlers 
and buyers to be on hand in time to select a choice 
piece of land. The vast amount of land sometimes 
sold within a short time after a land office has been 
in operation, has given rise to the expression, 
*' A land-office business;" and when applied to any 
enterprise or business affair, the force of the com- 
parison is apparent. 

The following table shows the amount received 
each year, from the sale of pubhc lands, for the 
past ten years: 

881 $2,201,863.17 

882 4,753,140.37 

883 , 7,955,864.42 

884 9,810,705.01 

885 5, 705,986.44 

886 5»63o,999-34 

887 9,254,286.42 

888 11,202,017.23 

889 8,038,651.79 

890 6,358,272.51 

Total. $70,911,786.70 



CHAPTER XXV. 

MISCELLANEOUS REVENUES. 
There are several sources of income to the 
United States that are not of sufficient importance 
to entitle them to any extended notice, yet brief 
mention must at least be made of them. This chap- 
ter will be devoted to the consideration of these 
revenues. 

Tax on National Banks. 

The first tax levied by the government on banks 
was imposed in 1863, at the time of authorizing the 
formation of national banks. The law provided 
that bank associations could deposit government 
bonds with the Treasurer of the United States as 
security and receive national bank notes to the 
amount of ninety per cent, of the bonds deposited 
with the Treasurer. Besides being security for the 
circulating notes these bonds bore interest, which the 
bank association owning them had a right to collect. 
As the government bonds were not taxed. Congress 
passed a law, in 1864, imposing the following taxes 
on national banks: 

" In lieu of all existing taxes, every association 
shall pay to the Treasurer of the United States, in 

the months of January and July, a duty of one-half 

334 



FEDERAL FINANCES. 235 

of one per centum each half year upon the average 
amount of its notes in circulation, and a duty of 
one-quarter of one per centum each half year upon 
the average amount of its deposits, and a duty of 
one-quarter of one per centum each half year on 
the average amount of its capital stock beyond the 
amount invested in the United States bonds." 

The law of 1883 abolished the tax on the capital 
and deposits of national banks. The only tax now 
on banks is the tax on the circulation of national 
bank notes, which is one-half of one per centum for 
each half year. The table given below shows that 
the income received from national banks has fallen 
off considerably since the tax on deposits and capi- 
tal was repealed in 1883. 

The amount received each year from the tax on 
national banks for the last ten years is as follows: 

881 $8,116,115.72 

882 8,956,794.45 

883 9,111,008.85 

884 • 3.108,730.13 

885 2,914,222.25 

886 2,693,712.87 

887 2,385,851.18 

888 1,748,566.85 

889 1,536,087.16 

890 1,301,326.58 

Total $41,872,316,04 



236 ' FEDERAL FINANCES. 

Patents and Copyrights. 

All patents are issued in the name of the United 
States of America, under the seal of the Patent 
Office, and are signed by the Secretary of the Inte- 
rior, and countersigned by the Commissioner of 
Patents. Every patent contains a short title or 
description of the invention, indicating its nature 
and design. The length of time for which a patent 
is granted is seventeen years. 

The following are the rates for patent fees : On 
filing each original application for a patent, fifteen 
dollars; on receiving patent, twenty dollars; on 
filing each caveat, ten dollars ; application for the 
re-issue, thirty dollars; on receiving an extension 
of the patent, fifty dollars ; for certified copies, ten 
cents per hundred words. Patent fees are paid to 
the Commissioner of Patents, or to the Treasurer, 
or to any of the Assistant Treasurers of the United 
States. 

Any company or person entitled to the exclusive 
use of any lawful trade-mark, or who intends to 
adopt and use any trade-mark for exclusive use 
within the United States, may obtain protection 
for such lawful trade- mark by complying with the 
following requirements : By causing to be recorded 
in the patent office a statement specifying the names 



FEDERAL FINANCES. 237 

of the parties who desire the protection of the 
trade-mark, a description of the trade-mark itself, 
with fac-similes thereof, showing the mode in which 
it is to be appHed and used, and by making pay- 
ment of a fee of $25. 

Copyrights are under the charge of the librarian 
of Congress. Any citizen, or anyone living in this 
country, who is the author, inventor, designer or 
proprietor of any book, map, chart or musical com- 
position, engraving, cut, print or photograph, or 
of any painting, drawing or statue, may secure a 
coyyright on the same for a term of twenty-eight 
years by complying with the regulations of law and 
upon payment of the proper fee to the librarian of 
Congress. These fees are as follows : For record- 
ing the title or description of the copyright, fifty 
cents ; for furnishing copy under seal of such record, 
fifty cents ; for recording any instrument of writing 
for the assignment of a copyright, fifteen cents for 
every one hundred words ; for every copy of an 
assignment, ten cents for every hundred words. 
All fees so received are paid into the treasury of 
the United States. 

Fees, Fines and Penalties. 

Besides the import duties there are certain fees 
charged by the government for making out papers 



238 FEDERAL FINANCES. 

at the custom houses that bring in an income of sev- 
eral thousand dollars to the government each 
year. The fee for granting clearance papers is two 
dollars and fifty cents. For permit to land and 
unload is one dollar. Certifying manifest is ten 
cents. Permit to load goods for exportation, thirty 
cents. The receipts derived from these and nu- 
merous other custom house fees are not included in 
the treasurer's report of duties collected, but are 
placed under the head of customs fees. 

There are several consular fees. The principal 
one is the fee of two dollars and fifty cents for - 
verification of invoice. 

Another class of fees that bring a small revenue 
to the government is the land fees. The fees col- 
lected at land offices are not included in the report 
of receipts derived from the sale of public lands, 
but are reported as a separate item. 

Under the head of receipts derived from fines 
and penalties may be mentioned the seizure and 
sale of smuggled goods, and the amounts received 
from fines imposed on those attempting to smuggle. 
Penalties are imposed for removing merchandise 
from a landing place without permit. Vessels 
departing for a foreign port without securing 
clearance papers are subject to a heavy fine. The 



FEDERAL FINANCES. 239 

amounts received from these sources are turned 
into the tre^ury. 

Pacific Railroads. 

Congress granted a charter in 1862 to a company 
called the Union Pacific Railroad Company. The 
charter authorized the company to build a railroad 
from some point on the one hundredth meridian, 
between the Republic and Platte Rivers in Nebraska 
to the western boundary of Nevada. The company 
was allowed to issue one hundred thousand shares 
of stock in sums of one thousand dollars each. 
Congress granted to the company the right of way 
for two hundred feet in width, and a grant of 
12,800 acres of public land for each mile completed. 
A subsidy was granted to the amount of $16,000, 
$32,000, $48,000 per mile, according to the loca- 
tion of the road and the nature of the country 
through which it passed. This subsidy was in the 
nature of bonds of the United States, secured by a 
first mortgage on all the property of the company, 
and to be issued from time to time as the road was 
completed and accepted by the government. These 
bonds were made to run thirty years from the date 
of issue. It was provided that interest should not 
be paid by the railroad company on these bonds 



240 FEDERAL FINANCES. 

until the principal should become due; that the 
United States should receive toward^the payment 
of these bonds five per centum of the net earnings of 
the road, and to secure such payment the govern- 
ment was authorized to withhold one-half of the 
compensation for services rendered to it by said 
company. 

The provision relating to the repayment of the 
bonds are in these words: " All compensation for 
services rendered for the government shall be 
applied to the payment of said bonds and interest, 
until the whole amount is fully paid; and after said 
road is completed, until said bonds and interest are 
paid, at least five per centum of the net earnings of 
the said road shall be annually applied to the pay- 
ment thereof." This part of the charter was finally 
amended as follows: " Only one-half of the com- 
pensation for services rendered the government 
shall be required and applied to the payment of 
said bonds issued by the government in aid of the 
construction of said railroads." As a result of this 
legislation considerable litigation has sprung up. 

About a year before the charter was granted to 
the Union Pacific Railway, a company had been orga- 
nized under the general railroad law of California, 
under the name of Central Pacific Railroad Com- 



FEDERAL FINANCES. 24 1 

pany. The object of this company was to build a 
railroad from Sacramento across the mountains to 
the eastern boundary of the State. 

By the act of Congress incorporating the Union 
Pacific Company the Central Pacific of California 
was declared entitled to the same right of way, land 
grants, subsidy and other aid which had been 
granted to the former. These two railroads form 
practically one line, and both have been subject to 
the same Congressional legislation. 

As a result of the indebtedness and operations of 
these railway companies, and the disposition they 
made of their incomes, they succeeded in evading 
the payment of the interest and bonds due the gov- 
ernment. As it was known that the operation of 
these roads was profitable, it became necessary for 
the government to take steps to collect its just 
dues. To do this, further legislation was necessary, 
and, in 1878, an act known as the Thurman bill 
passed both Houses. 

The bill provides that the net earnings of these 
railroad companies shall be ascertained by deduct- 
ing from the gross amount of their earnings the 
necessary expenses actually paid out within the 
year; and also the sum paid by them, within the 
year in discharge of interest on their first mort- 



242 FEDERAL FINANCES. 

gage bonds, which had a priority over the Hen of 
the United States, and excluding from considera- 
tion all sums owing or paid by these companies to 
other parties. This law has operated to prevent 
these railroad companies from creating new debts 
with a view of defrauding the government. 

The same law provided that the compensation 
due the railroads for carrying the mails, transport- 
ing soldiers, etc., shall be retained by the United 
States, and that one-half of the amount must be 
applied toward payment of the interest due on the 
bonds which the government had issued to the rail- 
road companies in 1862. The other is deposited 
in a sinking fund to be invested by the Secretary 
of the Treasury in bonds of the United States. 
The semi-annual income from this source to be 
from time to time invested in hke manner. In ad- 
dition to this the railroad companies are required 
to pay into the Treasury annually, to the credit of 
the sinking fund, the sum of $1,200,000, or an 
amount sufficient to pay the five per cent, of the 
net earnings of these roads due the United States. 

The proceeds of this sinking fund are to go 
toward the payment of the bonds issued to the 
companies. The law provided that if the railroad 
companies fail to perform the requirements of the 



FEDERAL FINANCES. 343 

act, such failure is to operate as a forfeiture of their 
charter. 

The receipts of the government from the source 
called " From repayment of interest by Pacific 
railways," is the amount withheld from the com- 
panies each year for the liquidation of the interest 
paid by the government upon the bonds held by 
the companies. The income to the government 
derived from the source called " From sinking fund 
for Pacific railways," is the amounts received 
from the interest of the bonds in the sinking fund. 
The whole amount received from the sinking fund 
is ultimately to go toward liquidating the debt due 
the government from these railways. These amounts, 
although placed on the credit side of the Treasurer's 
books, are really not a source of income to the 
government. The amounts received from this source 
are only the annual payments due the government 
from the mortgage the latter holds on the Pacific 
railways. 

Minor Items. 

Seal Fisheries. The Secretary of the Treasury 
has the power to lease the right of taking fur-seals 
from the islands of Saint Paul and Saint George. 
The annual rental must not be less than fifty thou- 
sand dollars. In addition to this annual rental, a 



244 PEDERAL FINANCES, 

revenue tax of two dollars is laid upon each fur- 
seal skin taken and shipped from the islands above 
named. 

Soldiers' Home. For the support of this institu- 
tion the following funds are set apart: All fines 
adjudged against soldiers by sentence of courts- 
martial; all forfeitures on account of desertion; and 
all moneys belonging to the estates of deceased sol- 
diers, which are unclaimed by heirs. The commis- 
sioners are authorized to receive all donations made 
by any person for the benefit of the institution, and 
to hold the same for its sole and exclusive use. 

Indiaii Lands. The lands ceded to the United 
States by Indian tribes are surveyed and sold in the 
same manner as public lands. Under treaty stip- 
ulations, the proceeds derived from the sale of these 
lands are usually paid to the Indians in install- 
ments, or invested by the secretary in some judi- 
cious manner, as he may deem best, and the interest 
derived therefrom paid to them an^nually. 

District of Columbia. The District is under the 
controrl of Congress, and its municipal afTairs are 
regulated by three commissioners appointed by the 
President and Senate. Fifty per cent, of the amount 
required to pay the municipal expenses of the Dis- 
trict is paid by Congress, but the other fifty per 



FEDERAL FINANCES. 245 

cent, is levied on the taxable property in the Dis- 
trict, and collected by the commissioners and paid 
into the Treasury of the United States. 

Sale of Government Property. Military stores, 
when damaged or unsuitable for public service, may 
be sold by order of the President. When any 
armed vessel of the United States is so much out 
of repair that it can not be advantageously fitted 
out, the President may ordered it to be sold. The 
Secretary of the Navy may sell at public auction 
any navy materials which, in his opinion, are unfit 
for government use. The proceeds of such sales 
are added to the receipts of the treasury. 

Immigrant Fund. Every death by natural disease, 
occjarring during the voyage among passengers of 
more than eight years of age, on board any vessel 
arriving in the harbors of the United States, sub- 
ject the owners of such vessel to a fine of ten dollars. 
The money arising from this exaction goes to the 
immigrant fund. The immigrant fund is further 
enhanced by the tax of fifty cents for each passen- 
ger brought from a foreign country. This fund is 
expended under the direction of the Secretary of 
the Treasury for regulating immigration, and for the 
care of immigrants arriving in the United States, 
and for the relief of such as are in distress. This 



246 FEDERAL FINANCES. 

tax must be paid by the owners of vessels carrying 
immigrant passengers. 

Depredations of Public Lands. Section 2462 of 
the Revised Statutes makes it a serious offense to 
cut and take away any liveoak or red cedar timber 
on public lands reserved for naval purposes. Such 
lands are usually located on navigable rivers or by 
good harbors. The master or owner of a vessel 
who transports any timber reserved for naval pur- 
poses, is subject to a fine of one thousand dollars, 
and his vessel is liable to seizure 

As regards other timber in the interior of the 
country, it may be cut and used for mining, build- 
ing and agricultural purposes by citizens of the 
United States. But anyone taking timber for other 
purposes, or transporting it for sale, commits a mis- 
demeanor, and may be imprisoned six months, and 
compelled to pay a fine of five hundred dollars. 
Persons committing waste on timber belonging to 
the government are usually permitted to escape 
punishment by paying for the timber they have 
taken. All moneys received from fines and settle- 
ments in depredation cases are turned into the 
treasury. 



CHAPTER XXVI. 

THE GREAT CONTROVERSY. 

It is not inconsistent with the plan of this work 
to place before the reader some general informa- 
tion in regard to tax systems. 

There are two ways to study policital economy. 
One way is to seek the present good, the other is 
to seek the good of the future. It is often the ob- 
ject of writers on sociology to theorize for the com- 
ing man. They endeavor to start processes of 
thought and to provoke discussion that will ulti- 
mately lead to new and better methods of securing 
public revenue, and of managing the financial 
affairs of a nation. These discussions have thrown 
a strong light upon economic questions, and there 
is reason to believe that in the near future the sub- 
ject will be much better understood. 

Among the speculative theories that maybe 
mentioned is the " single tax " idea of Henry 
George. The advocates of this theory claim that 
all taxes should be laid upon land. Personal 
property should not be taxed, for the reason that 
this is produced or earned by the individual. But 



248 FEDERAL FINANCES. 

rent and the increase in price of land, they claim, 
is the property of society, and should be appropri- 
ated to the use of the government. It is probable 
that the wide dissemination of this theory will re- 
sult in a heavier taxation being placed upon real 
estate held only for speculative purposes. 

Jeremy Bentham, an English jurist, advocated a 
peculiar theory of taxation. He proposed to re- 
strict inheritances, providing that the greater part 
of estates go to governments instead of the heirs, 
thus abolishing taxes altogether. It is not probable 
that such a visionary scheme will ever be fully 
realized, yet there is a germ of truth hidden in the 
suggestion. It may be, in times to come, that the 
maximum amount an heir may inherit will be reg- 
ulated by law. The Illinois State Bar Association, 
at their meeting in January, 1886, made a recom- 
mendation as follows: 

" That the statutes of descent of property and of 
wills be so changed, as to limit the amount that any 
one may take by descent from the same person or 
by bequest or devise, except for educational and 
other charitable purposes." 

The object of this law as recommended, is only 
to provide against the amassment of large fortunes 
in a few hands, and does not touch the question of 



FEDERAL FINANCES. 249 

taxation. It follows in a measure the extreme 
theories held by the English jurist just mentioned. 
The result of this discussion will probably, in this 
country, lead to a well regulated income tax, which 
will have a tendency to clip large fortunes, as well 
as to bring a revenue to the government. 

The economical systems of a nation are the result 
of growth. Changes should be made slowly. The 
fact that a system of taxation has many imper- 
fections is no argument in favor of radical or hasty 
reforms. It would be rash in the extreme to abol- 
ish all the old forms of taxation, and adopt in their 
stead new and untried theories. Great harm would 
be done before a country could adjust itself to the 
new order of things. If a man has an orchard full 
of crooked trees that bear only indifferent seedlings, 
yet it remains true that the orchard bears fruit, and 
if he cuts it down and tears up the roots, it is evi- 
dent that he will have no orchard and no fruit until 
he plants another one and it grows to maturity. It 
is certainly better husbandry to prune and care for 
the old orchard while the new one is coming on. 

A nation may be likened to an individual. It 
grows up with imperfections. It is what it is 
because circumstances have made it such. The in- 
dividual may possess bgdily imperfections, yet the 



250 FEDERAL FINANCES. 

constitution and physical vigor he possesses is the 
best he has, and he may, with care, prolong his 
life to the ordinary span of mortal existence. It is 
the same way with a nation — it is a growth. Causes 
which no human agencies could have averted have 
conspired to make it what it is. Our own great 
nation may possess imperfections, there may be in 
the structure some ill-fitting material, there may 
even be in the very foundation some weak timber — 
but it is the only government we have, and we can 
not tear it to pieces and build it anew any more than 
we can transform a hunchbacked old man into a 
straight and lithesome youth. But there is one 
thing we can do — we can amend, fix up, doctor, 
repair and improve. In other words, we must 
accept our government as it is and make the most 
of it. 

It may have been that if this country had retained 
an interest in the gold and silver mines found upon 
its public domains, and had leased them out, thereby 
ittsuring a continued revenue to the government, 
that it would have been much wiser than to have 
sold them, as has been done. It may be that it 
would have been much better for the general 
prosperity of the people of the United States if the 
government, at the outset, had provided for direct 



FEDERAL FINANCES. 25 I 

taxation, and had never resorted to customs and 
tariff duties. But it is too late now to speculate 
upon these themes. The mining lands have been 
sold, and the customs tax has become imbedded in 
the financial system of the country. It now remains 
for us to curtail such abuses as we may find in our 
national tax system, to enlarge upon its good 
features, to engraft upon it new principles, and to 
see to it that our revenue policy grows and expands 
with the growth of the country. 

As it is with the present that the practical citi- 
zen has to deal, we will dismiss all peculiar and ex- 
travagant theories and come to the consideration of 
the present state of affairs. 

There are two systems of taxation that have 
long been in practice, and precedent has made both 
of them respectable. They are the direct and in- 
direct systems of taxation. A few definitions may 
not be out of place at this time. John Stuart Mill 
says that "A direct tax is one which is demanded 
from the very persons who it is intended or desired 
should pay it." The same authority says, "Indi- 
rect taxes are those which are demanded from one 
person, in the expectation and intention that he 
shall indemnify himself at the expense of another." 

A tax on land, a poll tax, a tax on personal 



2^2 FEDERAL FINANCES. 

property and an income tax are instances of direct 
taxes. Stamp taxes, internal revenue taxes, and 
customs duties are examples of indirect taxes. An 
indirect tax may be called a tax on commodities 
that is paid by the purchaser. 

Nearly all State taxes are direct taxes. The 
government, at the present time, is supported en- 
tirely by indirect taxes. When a man goes to the 
county treasurer's office to pay taxes on his real 
estate and personal property, he pays an assessed 
amount for which he receives a receipt — this is di- 
rect taxation. When a man buys a box of cigars, 
he not only pays for the tobacco and cost of manu- 
facture, but he pays also the stamp duty of fifteen 
cents per box which the manufacturer first paid to 
the revenue collector, and then afterward added to 
the price of the cigars. It is an indirect tax be- 
cause it was primarily paid by the manufacturer, 
and because it is not a fixed and certain amount 
required of each person, as each man's taxes for 
stamp duties on cigars depends entirely upon the 
amount he chooses to purchase. 

There has been much discussion as to the merits 
of these two systems. It is claimed in favor of the 
indirect tax that it is paid by a purchaser at such 
times and in such a way that he does not feel that 



FEDERAL PINANCES. 253 

he is paying a tax. The tariff, or revenue tax, be- 
comes compounded with the price of a commod- 
ity, and the buyer is unable to discern the amount 
of tax he pays. 

The advocates of the indirect system further 
claim that it is an advantage for the government to 
secure a liberal income without the people being 
aware that it is they who are furnishing the funds. 
If all taxes were direct, both Federal and State, the 
amount would seem enormous, and penurious peo- 
ple would be clamoring for a reduction of taxes. 
This, it is claimed, would embarrass the govern- 
ment and prevent it, in many instances, from carry- 
ing out liberal and beneficial enterprises. 

The objecton to indirect taxation is that being a 
tax on consumption it does not discriminate be- 
tween the poor man's last dollar and the income of 
the miUionaire. A stamp tax on matches would 
not bear equally upon all classes of people. The 
poor widow in an open and windy shanty would 
use nearly as many matches as a well to do family 
in a good home. 

Another objection to the system of indirect tax- 
ation is the cost required in its collection. A vast 
army of officials is especially required in the collec- 
tion of the customs duties. Another objection 



254 FEDERAL FINANCES. 

urged against this system is that it is a hidden and 
a secret way of securing the revenue for the gov- 
ernment, and that the people paying such a tax 
have no knowledge of the amount the government 
secures in this way, and they do not as carefully 
watch the national expenditures as they would if 
they paid direct taxes. 

It is claimed in favor of direct taxation that it is 
more in accordance with the advanced ideas of 
civilization, and that it rests upon more just and 
business-like principles. When a man pays direct 
taxes, he knows to a cent what the amount is, and 
when paid he receives a receipt therefor. It makes 
of the taxpayer a more intelligent citizen, and 
instead of being careless and indifferent to the 
amount of taxes he pays, the citizen becomes alert 
and watchful and carefully scrutinizes public ex- 
penditures. If the direct system were applied to 
national affairs there would not be so much wasteful 
extravagance. Under a system of direct taxation 
a nation cannot be made bankrupt by its rulers. 

While it is true that direct taxation is a more 
exact and just method of securing public revenue, 
and is more in harmony with our republican form 
of government, which is based upon the intelligence 
of the people, yet to resort wholly to such a system 



FEDERAL FINANCES. 255 

at the present time would be of doubtful expe- 
diency. There are a number of able writers who 
hold that all the people are not yet sufficiently in- 
telligent, patriotic and public spirited as to willingly 
furnish the government all needed revenues by 
direct taxation. This is especially true, since the 
hidden and seemingly easy system of indirect tax- 
ation has so long been in practice. 

The concensus of opinion of those best qualified 
to know is that, under the present state of affairs, a 
mixed system of taxation is the best for our govern- 
ment. Several impartial writers on political econ- 
omy believe that at least a small portion of the 
federal income should be raised by direct taxation. 
This, it is claimed, would give the citizen more of 
an interest in federal taxation and would bring the 
subject before him as State and county taxes are 
now brought to his notice. 

As the State taxes are nearly all direct, and the 
national taxes are all of an indirect nature, we have 
in this way the advantages of a mixed system of 
taxation, and the policy is not likely to be changed 
soon. It is generally conceded by practical men 
that we must, for some time to come, receive the 
bulk of our national income through the custom 
house and by way of the internal revenue office. 



256 FEDERAL FINANCES. 

Up to this point the majority of careful thinkers 
agree with each other. The internal revenue tax 
meets with general approval, and there is no discus- 
sion about the matter except as to the amount this 
source should he made to bear. But there are 
certain features in the application and assessment of 
customs duties about which there is a wide diver- 
sity of opinion. It is here that the great contro- 
versy begins. 

The nature of the customs tax is such that, in 
levying the duties, it is possible for the govern- 
ment to favor certain manufactures or industries. 
A duty so levied on articles imported into this 
country as to aid or favor a certain home industry 
is called a protective tariff. It is generally under- 
stood that a protective tariff is a high duty levied 
on foreign goods with a view not only of raising a 
revenue for the government, but of aiding home 
industries engaged in manufacturing the same arti- 
cles, by shutting out foreign competition. A low 
tariff levied on imported goods, whether the same 
be a product of this country or not, is called a 
tariff for revenue only. Those who believe in the 
protective theory are called protectionists, and 
those who believe that customs duties should be 
levied only for revenue, without attempting in any- 



FEDERAL FINANCES, 257 

way to aid any special trade, or to give protection 
or favor to any manufacturing industry, are called 
free traders. 

It is claimed in favor of protection that it not 
only furnishes a revenue to the government, but 
^hat it gives special aid to such industries as come 
in competition with the products of foreign coun- 
tries. This, it is claimed, builds up home industries 
at the expense of the foreign trade. 

It is further urged by those believing in this sys- 
tem that protection, by aiding one industry also 
aids another, and in this way increases business and 
creates a home trade. 

Allied to the doctrine that a high tariff will foster 
home industries is the claim that it will also furnish 
a home market for the products of the farm. It is 
claimed that protection will aid in bringing about a 
diversity of industries and an increased growth in 
manufacturing establishments, which will result in 
bringing a home market nearer to every farmer's 
door. 

Another argument in favor of the protective 
policy is that it protects labor. A high duty on 
imported manufactured goods will make home 
products command a higher price, and, conse- 



258 FEDERAL FINANCES. 

quently, enable the manufacturer to pay higher 
wages. 

It is further claimed by the protectionist that a 
nation should have diversified industries, and that 
it should not be required to depend upon other 
countries for any important class of manufactured 
articles. A condition of war has been pointed out 
as an instance in which a nation should be especially 
able to provide for its own wants. This can be 
brought about, it is said, by protecting industries 
which are not yet self-sustaining. 

The free traders claim that the object of taxation 
should be to collect a revenue for the government, 
and that taxes should not be levied in such a way 
as to give special aid or protection to one industry 
more than to another. The object of a high tariff 
duty is to shut out the foreign article, and to enable 
the home producer to sell at a higher price. This, 
the free trader claims, is a tax on consumers for the 
benefit of a favored few. 

Another objection to a high protective duty is 
that even if it was proper, at one time, for the gov- 
ernment to aid infant industries, that this condition 
does not now exist, and that there is no reason for 
protecting them at the present time. The manu- 
factures usually protected are powerful monopolies 



FEDERAL FINANCES. 259 

and should be required to face foreign competition 
instead of being protected. 

The free traders further claim that, in levying a 
protective tax, it gives rise to contention, strife and 
corruption in the efforts of one industry to gain an 
advantage over another. If Congress is to subsi- 
dize some special industry at eveiy session of the 
national legislature, then there will be no end to 
intrigue, corruption and monopoly. 

While admitting that a high tariff duty will ben- 
efit the industry that is protected, the free traders 
claim that it is class legislation, and does not assist 
in the general building up of the country. The 
only industries worth anything to a country are 
those that have grown up on a solid foundation and 
are self-sustaining. Industries that are fostered 
and cared for by taxing the people for their sup- 
port are a burden and not a blessing to a country. 
The farmer who would thrive must raise crops that 
are indigenous to the soil he tills. To grow exotic 
plants will bring him no profit. Diversified indus- 
tries, the opposers of protection claim, will come in 
a natural and healthy way, at the proper time, and 
do not need any hot-house forcing. To prove their 
theory they cite the States of the Union, among 
which there is unlimited free trade, as an instance 



260 FEDERAL FINANCES. 

that manufactories will come to a new country when 
the time is ripe for them, without protection and 
without favor. Candy factories do not flourish in 
backwoods towns, but they come when these towns 
grow into cities and there is a demand for them. 
It would be easy to cite numerous instances in 
which candy factories have flourished in Western 
States, although they had to come into competition 
with the Eastern States, and they were not protected 
against this competition. 

The same maybe said in reference to many other 
manufacturing industries that have grown up in the 
Western States, although they came in competition 
with the manufacturing establishments of the East- 
ern States. Among the manufacturing industries 
which have grown up and are flourishing in the 
Western States, in spite of the competition of the 
Eastern States, and against which there is no pro- 
tection, may be mentioned those of agricultural 
implements, furniture, boots and shoes, woolen 
goods, and clocks and watches. 

Pointing to this remarkable development of the 
Western States as against the Eastern States, and 
this without protection, the free traders argue that 
the United States wrll acquire and hold new indus- 



FEDERAL FINANCES. 26 1 

tries in due time, and in a natural and healthful 
manner. 

The advantages of a home market are not denied 
by the free traders, but they deny that a protective 
tariff is the best way to secure it. Centers of trade 
and industry grow up naturally with the increase of 
population and wealth. Chicago has become a 
great city and a great market chiefly on account of 
its location. New Orleans is also, by reason of its 
location, an important market. Many a boom town 
in the West has tried to become a center of trade and 
industry by paying bonuses to manufacturing enter- 
prises, and yet they have ingloriously failed. Mar- 
kets and cities are brought about by natural causes, 
not by taxation. 

While admitting that a home market may be con- 
venient, yet it is not of such vital importance, the 
low tariff party assert, that everything should be 
sacrificed for its sake. We should not, they say, 
pay more for a home market than it is worth. It 
will not pay a farmer living near a village to be 
taxed heavily on all his tools and necessities of life 
in order to maintain some sickly manufacturing 
establishment at the village. The free traders point 
to the fact that the home market theory is seldom 
carried out in the ordinary affairs of life. There 



262 FEDERAL FINANCES. 

are but few farmers who do not occasionally take 
quite a journey to some city for the purpose of 
selling in a better market than the home market, 
and buying in a cheaper one. 

The claim set forth by the protectionists that a 
high tariff protects the American laborer is met by 
the free traders with the statement that the only 
way to protect labor would be to exclude the cheap 
pauper labor arriving daily from the old world by 
placing a high tariff tax on immigrants. 

The claim that protection will make a nation 
independent and prepare it for a war is met by the 
statement that it is a poor kind of independence to 
possess. The man who secludes himself from his 
neighbors and lives a hermit life may be independ- 
ent, but he is not very progressive. The farmer 
who does not patronize the blacksmith or harness- 
maker, but does all his own " mending," may be 
independent, but he does not often make money. 
It is the same with a nation as with an individual. 
To be selfish and exclusive is not a good policy for 
either men or nations to follow. The believers in 
free trade point to China and Japan as countries 
that would not be formidable in war, although they 
have been developing their own resources for many 



ED -63 



FEDERAL FINANCES. 263 

centuries, and, until recently, have had no trade rela- 
tions with the rest of the world. 

Another argument advanced against the protect- 
ive tariff is that it is a narrow, selfish and exclusive 
policy. That it does not occupy a high plain of 
liberalism, and that it tends to check and stultify 
advancing civilization. The free traders claim that 
a low tariff would bring in an abundant revenue, 
and yet would not interfere with the utmost free- 
dom of trade. It is argued that freedom of inter- 
course among nations is one of the greatest factors 
in advancing the prosperity of the world; and that 
trade, when carrying only a light weight, will grow 
and increase in a normal manner, furnishing more 
work, more food and more clothing to all the 
world than when loaded down with heavy duties. 
Trade should be facilitated, not hampered, for 
commerce, more than any other one thing, has had 
a tendency to soften the jealousies existing between 
different nations, and to bring mankind into one 
common brotherhood. 



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